Extending theory by analyzing developing country multinational companies: Solving the Goldilocks debate

Published on Aug 1, 2012in Global Strategy Journal 2.12
· DOI :10.1111/j.2042-5805.2012.01039.x
Alvaro Cuervo-Cazurra31
Estimated H-index: 31
(College of Business Administration)
Abstract
I analyze how the study of developing country multinational companies (DMNCs) can help extend theory. The renewed interest in DMNCs has generated a ‘Goldilocks’ debate, with one camp arguing that the analysis of DMNCs is ‘hot’ and requires new theory, another camp arguing that it is ‘cold’ and no new theory is required, and a third camp arguing that it is ‘just right’ and it can be used to extend theory. I follow this third camp and argue that the unique conditions of developing countries influence the internationalization of DMNCs, creating a laboratory for extending theory. I illustrate this idea by reviewing some of the key theories and models of the multinational company and explaining how they can be extended with the study of DMNCs.
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Pankaj Ghemawat28
Estimated H-index: 28
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Jean-François Hennart35
Estimated H-index: 35
Does Dunning's OLI model really explain the pattern of foreign direct investments by emerging market multinationals (EMMs)? I argue that it suffers from the basic flaw of assuming that location advantages (CSAs) are properties of a country and freely available to all firms operating there. But some CSAs have owners, usually local firms, who can sometimes derive significant gains from the monopoly control of these resources. They can use this monopoly power to finance intangible-seeking investmen...
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Published on Jan 15, 2009in Neuroreport 1.27
Jean-François Hennart35
Estimated H-index: 35
(Tilburg University)
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Raymond Fisman38
Estimated H-index: 38
(Columbia University),
Tarun Khanna40
Estimated H-index: 40
(Harvard University)
A defining characteristic of developing countries is the inadequacy of basic services normally required to support organized economic activity. One way in which the private sector acts to facilitate development is through investments orchestrated by agglomerations of firms called business groups. Such groups dominate the landscape of virtually all developing countries. Our study of plant location decisions in India shows that group-affiliates are more likely to (profitably) locate in less-develo...
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Tarun Khanna40
Estimated H-index: 40
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Krishna G. Palepu33
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Snehal Awate4
Estimated H-index: 4
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Marcus Møller Larsen8
Estimated H-index: 8
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Ram Mudambi41
Estimated H-index: 41
(Temple University)
Emerging economy multinationals (EMNEs) are catching up with advanced economy MNEs (AMNEs) even in emerging, high technology industries, where their knowledge-based disadvantages are most severe. We explain this phenomenon by distinguishing between output and innovation capabilities. Successful EMNEs' focus on output capabilities need not facilitate innovation catch-up. We compare the knowledge bases of an industry-leading AMNE and a fast-follower EMNE using patent data, buttressed by qualitativ...
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Yadong Luo63
Estimated H-index: 63
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Stephanie Lu Wang9
Estimated H-index: 9
(University of Miami)
We explore how home country conditions affect outward foreign direct investment (OFDI) strategies (scale, timing, location) employed by developing country multinational corporations (DMNCs). Extending from the springboard and LLL (leverage, linkage, and learning) perspectives, we illustrate that DMNCs rely on their home base during their internalization process in a unique fashion compared with traditional multinationals due to their well-established strengths at home and competitive weaknesses ...
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Published on Aug 1, 2012in Global Strategy Journal 2.12
Anirvan Pant3
Estimated H-index: 3
(Indian Institute of Management Bangalore)
The emergence of developing country multinational companies (DMNCs) provides us an opportunity to redress the neglect of the process of cross-border legitimation. We argue that DMNCs face three challenges to legitimation in developed country markets—liability of foreignness, liabilities of origin, and liability of advantage. By means of a qualitative inquiry into the cultural-cognitive legitimation of Indian software services firms in the United States over the course of two decades, we identify...
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İbrahim Anıl3
Estimated H-index: 3
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Ekrem Tatoglu32
Estimated H-index: 32
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Gaye Ozkasap1
Estimated H-index: 1
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Vikas Kumar26
Estimated H-index: 26
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Estimated H-index: 8
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Senay Acikgoz4
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We note that a non-trivial fraction of international acquisitions by emerging economy firms are in tax havens. We argue that such acquisitions are driven by different motivations than the four (market seeking, resource seeking, low cost seeking, and knowledge or strategic asset seeking) identified in the international business literature. Specifically, we argue that such acquisitions are driven by institutional weakness in the home country and lower taxes in the host country. Empirical tests usi...
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Estimated H-index: 7
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Estimated H-index: 14
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