International Journal of Emerging Markets

Emerald Article: Emerging multinationals: home and host country determinants and outcomes Peter Gammeltoft, Jaya Prakash Pradhan, Andrea Goldstein

Article information:
To cite this document: Peter Gammeltoft, Jaya Prakash Pradhan, Andrea Goldstein, (2010),"Emerging multinationals: home and host country determinants and outcomes", International Journal of Emerging Markets, Vol. 5 Iss: 3 pp. 254 - 265 Permanent link to this document: http://dx.doi.org/10.1108/17468801011058370 Downloaded on: 07-10-2012 References: This document contains references to 33 other documents Citations: This document has been cited by 4 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 1987 times since 2010. *

Users who downloaded this Article also downloaded: *

Andrea Goldstein, Fazia Pusterla, (2010),"Emerging economies' multinationals: General features and specificities of the Brazilian and Chinese cases", International Journal of Emerging Markets, Vol. 5 Iss: 3 pp. 289 - 306 http://dx.doi.org/10.1108/17468801011058398 Rajah Rasiah, Peter Gammeltoft, Yang Jiang, (2010),"Home government policies for outward FDI from emerging economies: lessons from Asia", International Journal of Emerging Markets, Vol. 5 Iss: 3 pp. 333 - 357 http://dx.doi.org/10.1108/17468801011058415 Dirk Holtbrgge, Heidi Kreppel, (2012),"Determinants of outward foreign direct investment from BRIC countries: an explorative study", International Journal of Emerging Markets, Vol. 7 Iss: 1 pp. 4 - 30 http://dx.doi.org/10.1108/17468801211197897

Access to this document was granted through an Emerald subscription provided by INDEPENDENT UNIVERSITY BANGLADESH For Authors: If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service. Information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com With over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in business, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as well as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.
*Related content and download information correct at time of download.

The current issue and full text archive of this journal is available at www.emeraldinsight.com/1746-8809.htm

IJOEM 5,3/4

GUEST EDITORIAL

254

Emerging multinationals: home and host country determinants and outcomes

Peter Gammeltoft
Department of International Economics and Management, Copenhagen Business School, Frederiksberg, Denmark

Jaya Prakash Pradhan

Sardar Patel Institute of Economic and Social Research, Ahmedabad, India, and

Andrea Goldstein
Organisation for Economic Co-operation and Development (OECD), Paris, France
Abstract
Purpose The purpose of this paper is to present a framework for analyzing home and host country determinants and outcomes of emerging multinationals (EMNCs). Design/methodology/approach The paper applies a conceptual approach combined with analyses of statistics and secondary material. Findings The paper identies changing trends and features of outward foreign direct investment (OFDI) from emerging economies and identies in particular differences between outows from Brazil, Russia, India, and China (BRIC). Originality/value The paper puts forward a framework for analyzing determinants and outcomes of structures and strategies of multinational companies from emerging economies and surveys contemporary trends and features of outward FDI from these economies. Keywords Multinational companies, Emerging markets, International investments Paper type Research paper

Introduction Outward foreign direct investment (OFDI) by rms based in developing or emerging countries is at rst sight not a new phenomenon. Such rms have been undertaking international investments since the 1970s. At the time, however, the term emerging multinationals (EMNCs) referred to a very small number of companies with modest foreign operations, predominantly in their own region and overwhelmingly turned to low-technology goods and services.
The special issue draws on the conference Emerging Multinationals: OFDI from Emerging and Developing Economies, October 9-10, 2008, Copenhagen Business School, which was generously funded by the Danish Social Science Research Council (FSE); Copenhagen Business School (CBS); Knud Hjgaards Fond; Hedorfs Fond; The Asia House Foundation; Asia Research Centre (ARC), CBS; and the Department of International Economics and Management, CBS. Punctilious comments by Ari Kokko are appreciated.

International Journal of Emerging Markets Vol. 5 No. 3/4, 2010 pp. 254-265 q Emerald Group Publishing Limited 1746-8809 DOI 10.1108/17468801011058370

In the current decade, EMNCs have entered into a new phase of overseas expansion. Their OFDI, in the form of greeneld investments and overseas acquisitions, have risen considerably faster than those from developed countries. OFDI ows from developing and emerging economies have increased from just $11.9 billion in 1990 to more than $340 billion in 2008, rising from 5 to 18 percent of global OFDI ows.[1]. Brazil, Russia, India, China, and Mexico but also smaller countries such as Chile, Egypt, and Turkey are homes to truly global giants active in every economic sector and geography of foreign markets. What is more, such countries have also become very important sources of FDI inows for other developing countries, giving South-South economic cooperation a concrete manifestation beyond the rhetoric of political statements. Large scale overseas acquisitions have seen certain rms, hitherto largely competing in the national market, establishing themselves as important players in global markets. Their foreign afliates are making an increasingly important contribution to these EMNCs in terms of overall sales, assets and innovation capacity, while the presence of foreign directors and managers is also increasing. Even amid the current slowdown in global FDI and M&As, some EMNCs are turning the crisis into an opportunity and are accelerating the pace of their international expansion, acquiring hard-to-develop competencies such as brands and technologies, and actively participating in the consolidation of global industries such as chemicals (e.g. the attempt by Reliance to acquire Lyondell-Basell), telecommunication (e.g. Bharti-Zain) and car-making (e.g. Geely-Volvo). While the evidence still comes mainly from estimates, and not yet from hard data, it seems that South-South FDI ows have also proven very resilient to the economic crisis (World Bank, 2010, p. 77). The rise of EMNCs as new players in the geography of global direct investment clearly calls for an enriched understanding of their behaviors. Exploring the prole of EMNCs, the nature of their strategies and the consequences of their actions can have signicant implications for the development of home and host economies. Against this backdrop, in this volume a group of eminent experts in their respective eld analyses some of the most important issues introduced by the rise of EMNCs. What are the trends and patterns of OFDI ows from emerging countries? Do they represent specic trajectories of internationalization? How do home country institutional and policy factors affect overseas expansion of EMNCs? What are the challenges these EMNCs face while operating in advanced countries? How do EMNCs fare under the global economic crisis? What are the implications of emerging country OFDI for host developed countries? A framework for EMNC determinants and outcomes A comprehensive understanding of the activities and organization of EMNCs, at home and abroad, how they are inuenced by their distinctive environments, and how they in turn inuence their surroundings calls for a multidimensional approach. A comprehensive analysis will have to take into account not only features of the EMNC itself but simultaneously features of the home environment from which it evolves and the host environments where it invests. Figure 1 propose a framework for such an analysis. As depicted in the gure, rst of all it is necessary to engage with the principal agent of outward investment, viz. the EMNC itself. However, the emergence and evolution of the EMNC is conditioned by determinants in both home and host country settings. In turn, the EMNC will bring about a set of impacts or outcomes in the home and host

Emerging multinationals

255

IJOEM 5,3/4

256

country environments in which it operates. Comprehensive and in-depth analyses will also consider the particularities of the headquarter-subsidiary relationships within the EMNCs. By fully covering the framework a comprehensive analysis is assured and the contributions in this special issue engage with different aspects of it. Extending beyond the analytical approach and into ways to engage theoretically with EMNCs, in the literature there are diverging assessments of whether or not new theories are required to address this phenomenon. The early studies (Lecraw, 1977; Kumar and Mcleod, 1981; Wells, 1983; Lall, 1983; Agarwal, 1985) generally assumed that OFDI could be analyzed and understood with received theories of internationalization. However, more recent studies suggest that there may be gaps in the extent to which extant theories can account for latecomer MNCs. Mathews (2002) sees EMNCs as being at odds with mainstream theories. EMNCs are typically not seeking to push monopolistic advantages as much as seeking to tap resources elsewhere and device appropriate strategies and organizational forms for doing so. Buckley et al. (2008), Luo and Tung (2007), Child and Rodrigues (2005) and Ramamurti (2009) also propose various theoretical extensions. Firms evolve as active creators of economic systems and their organization and strategies signicantly inuence economic outcomes. Chandler (1977) for example showed how the modern business enterprise emerged at the core of the capitalist economic system and triggered responses in government regulations and policies, nancial systems, and supporting institutions. Similarly, it is well recognized in the IB literature since Vernon (1966) that MNCs reect the institutional conditions of their home environment and that systematic differences prevail between MNCs of different national origins. Combining this insight with that of Chandler, we arrive at a dialectic relationship between the MNC and its environment: the MNC will reect the context in which it evolves (e.g. internalizing weak markets); and MNC activities will spill over into the context (e.g. through training and R&D); a context which will also actively accommodate its requirements (e.g. through regulations and supporting institutions). In other words, the MNC and its environment progress in a co-evolutionary process. The specicities of emerging economy environments may imply that they also bring about distinct MNCs and that EMNCs represent different evolutionary trajectories than developed economy MNCs. The approaches taken in this special issue generally assume that extant theory should be extended and rened to better account for the special features of emerging economy multinationals rather than be replaced.
EMNC Determinants Outcomes

Home

Environment

HQ

Environment

Figure 1. A framework for EMNC determinants and outcomes

Host

Environment

Subsidiary

Environment

Understanding the third wave of OFDI From a birds eye perspective, the increasing volume and intensity of outward direct investment from emerging economies during recent years can be abstracted into a third historical wave of these FDI ows (Gammeltoft, 2008; Rasiah et al., 2010). In broad terms, the rst wave can be established as the period up until the mid-1980s, the second as the period from the mid-1980s to mid-1990s, and the third from the mid-1990s until today. Considering the evolution of OFDI from emerging economies as a percentage of world outows, the three periods can be discerned quantitatively, Figure 2. Yet, the current wave does not only deviate from the previous ones in quantitative terms (scale). More importantly, contemporary EMNCs also display a number of qualitative differences from EMNCs of earlier periods, considered in general terms. The current wave witnesses the emergence of more advanced organizational and structural forms of EMNCs. While the rst period was dominated by import substitution strategies and the second by the pursuit of export orientation strategies, in the third period EMNCs are becoming increasingly global rather than merely international and develop more advanced and elaborate geographical divisions of labor. Another distinct feature of the third wave is that it represents a recovery of outward ows from Asia in the aftermath of the Asian nancial crisis, which also had contagion effects in Brazil, Russia and elsewhere. It also represents that a number of large emerging economies integrated themselves more closely into the global economy from the early 1990s and steadily progressed with their transition process. Furthermore, most economies acceded to the WTO during the second-half of the 1990s, which accelerated processes of liberalization, privatization and institutional reform and pushed EMNCs to internationalize to counter intensied competition at home as well as provided them with more and easier accessible business opportunities abroad (Gammeltoft et al., 2010). By reaching out into strategic resources located abroad EMNCs are also increasingly becoming instruments to bring about domestic restructuring and competitiveness building. The contributions in this special issue aspire to enhance our understanding of EMNCs and OFDI in this third wave. Outward FDI from emerging economies: changing trends and features The growth of OFDI from emerging and developing economies over the last two decades is summarized in Table I. On the average, EMNCs OFDI ows have grown by
20

Emerging multinationals

257

15

10

0 1970

1975

1980

1985

1990

1995

2000

2005

Notes: Percent of world outflows; emerging economies comprise the 113 countries and territories UNCTAD classifies as developing economies excluding LDCs, plus Russia

Figure 2. OFDI from emerging economies 1970-2008

IJOEM 5,3/4
Region/economy

OFDI ows As percentage of domestic gross xed capital Annual average ows Compound growth formation (dollar million) rate (%) 1990-1999 2000-2008 1990-1999 2000-2008 1990 2000 2007 417,630 371,727 45,904 44,742 1,452 105 925 2,323 16,497 3,484 266 45 70 55 2,911 63 1,503 614 154 1,382 68 4,641 1,296 163 144 503 1,141,025 970,701 170,325 149,944 20,381 844 7,867 14,079 36,954 7,191 1,234 344 6,659 145 6,551 998 4,648 3,613 555 18,553 2,188 11,068 559 1,050 5,476 1,325 48 47 58 57 38 54 51 15 70 13 126 34 144 210 55 25 108 49 45 36 18 68 121 156 138 38 32 28 57 51 151 221 123 165 39 20 131 232 176 145 58 274 133 46 65 151 64 32 152 66 281 79 5.0 5.8 1.4 1.4 3.2 0.6 0.8 12.2 14.3 0.2 0.1 0.0 0.0 1.1 2.6 0.9 0.5 0.2 22.9 17.1 0.1 0.0 20.9 4.2 17.6 17.5 20.5 22.9 6.5 9.9 8.5 7.2 4.4 12.5 1.0 38.1 2.1 2.9 0.2 1.6 133.1 145.7 8.7 13.7 3.1 2.2 0.3 2.5 0.5 4.7 0.1 0.4 3.1 5.6 2.3 77.0 8.5 27.4 0.3 4.4 0.8 16.7 7.3 16.9 4.7 13.1 20.9 60.8 1.3 5.1 2.0 2.0 2.7 38.2 2.1 4.1

258

Table I. Growth of OFDI from selected emerging economies, 1990-2008

World Developed economies Emerging economies Developing economies Transition economies Bahrain Brazil China Hong Kong, China SAR Taiwan, Province of China Colombia Egypt India Iran (Islamic Rep. of) Korea, Rep. of Libyan Arab Jamahiriya Malaysia Mexico Philippines Russia Saudi Arabia Singapore South Africa Turkey United Arab Emirates Venezuela (Bolivarian Rep. of )

Note: Compound growth rate is estimated from semi-log regression model Source: Based on UNCTAD online FDI dataset available at: http://stats.unctad.org/FDI

around 57 percent yearly in 2000-2008, compared with a fall in the growth rate of OFDI by developed country multinationals to 28 percent in 2000-2008 from 47 percent in 1990-1999. The average value of FDI outows by EMNCs stood at $170 billion in 2000-2008, nearly four times the average of the 1990s. The story is consistent across different emerging sub-regions. Firms that are aggressively investing are not only from large economies like China, India, Brazil, and Russia but also from a number of smaller emerging economies from Asia, Latin America, and Africa (Goldstein, 2007). This bears testimony to the widespread internationalization of emerging country rms that has taken place in recent years. Such a fast recent surge in percentage terms is partly due to the very small initial gures, but more importantly it reects the rapidly expanding internationalization intensity of EMNCs. OFDI by multinationals of emerging economies was estimated to account for about 10 percent of home economy gross xed capital formation in 2007, a nine fold increase from 1990. This is more than double the growth of the same ratio for

developed economies between 1990 and 2007. The foreign assets, foreign sales, and foreign employment of the largest 50 multinationals based in developing economies registered huge growth of 802, 432, and 247 percent, respectively, in the 1995-2007 period, and their degree of transnationality has increased from 32 percent in 1995 to 40 percent in 2007 (Figure 3). UNCTADs World Investment Report 2009 shows a number of sectoral features in the current boom of FDI outows from emerging markets. The OFDI growth from developing regions between 1989-1991 and 2005-2007 was highest in the service sector (367 percent), followed by the primary sector (320 percent) and then the manufacturing sector (46 percent) as a distant last. Owing to the increasing focus of developing country multinationals on service and primary sectors, the share of services in developing country OFDI ows more than doubled to 70 percent in 2005-2007 and the share of the primary sector rose to 9 percent. The share of manufacturing registered a rapid decline from 57 percent to just 17 percent in 2005-2007. As services became the largest sector for OFDI from emerging regions, emerging market rms became more visible players in a wide range of sectors like nancial and business activities, hotel and restaurant, telecommunications, business, and trading activities. The aggressive push of emerging market rms from China, India, Russia, Argentina, Malaysia, Chile, and Turkey into natural resource-based sectors including oil, gas, and minerals is mostly motivated to secure their current and future growth requirements (UNCTAD, 2007). The OFDI growth within the manufacturing sector is mostly due to emerging market rms from food and beverages, metals, machinery, and textile including leather. By 2005-2007, the global OFDI share of developing countries had increased signicantly across a broad range of industries reecting a shift in the relative position
1,800 TNI of World's largest 100 TNCs 1,612 1,600 ($ billions/1,000 employees) 1,400 1,200 1,000
32 58

Emerging multinationals

259

70 60 50 40 30
$595

TNI of developing regions largest 50 TNCs

45 49

55 1,156

35

36

800
$638

600 400 200 0 1995

$71 $112

464

403 $155 $186

$400 $382

20 10 0

(Percent)

40

2000 Assets Sales

2005 Employment

2007

Notes: Dollar billion, thousands, and percent; the TNI is measured in percent and calculated by averaging the foreign shares in total assets, total sales and total employment of an MNC Source: Based on World Investment Report, various years

Figure 3. Foreign assets, sales, employment and transnationality index (TNI) of largest 50 MNCs from developing economies

IJOEM 5,3/4

260

of emerging market rms in global production processes. The global OFDI share of the developing region stood at 1.5 percent in services, 7 percent in manufacturing and 8 percent in primary activities in 2005-2007 (UNCTAD, 2009). There were 14 industries where developing economies OFDI accounted for at least a 5 percent global share and six where they commanded at least a 10 percent share. EMNCs gained rapid ground in global market segments such as agriculture including hunting, forestry, and shing (43 percent), construction (24 percent), trade, (17 percent), business activities (15 percent) and coke, petroleum products, and nuclear fuel (13 percent). The broad trends described above appear to conrm the increasing internationalization of emerging country rms as a genuinely long-term structural feature. However, ongoing research on individual emerging market OFDI from China, India, Brazil, and Russia indicates wide diversity in internationalization trends among emerging market multinationals. The rise of EMNCs from China is now well documented in the literature (Wu and Chen, 2001; Wong and Chan, 2003; Deng, 2004; UNCTAD, 2004a, 2007; Buckley et al., 2008; Pradhan, 2009a). The Chinese multinationals, which had a regional presence in 1950s-1970s and went mostly into service activities targeted at Hong Kong (Zhang, 2003; Sung, 1996), grew rapidly following the adoption of the economic openness policy in 1979 and again after the adoption of the go global policy in 2001. Chinese OFDI assumed a diversied prole in terms of sectors and geographies against the backdrop of high-domestic growth and a liberal OFDI policy. In the 1980s and 1990s, OFDI by rms in manufacturing and natural resource sectors rose rapidly and manufacturing OFDI overtook overseas investment in services. In the 2000s, the Chinese Government has assigned state-owned multinationals the task of proactively securing natural resources in order to sustain a rapidly growing economy. Unlike in the past, these rms now increasingly preferred to go alone in their OFDI activities rather than seek collaboration with local rms in host countries via joint ventures (Buckley et al., 2008). Most importantly, Chinese OFDI ows between 2007 and 2008 nearly doubled to $52 billion, notwithstanding the global economic crisis, decelerating domestic growth, declining exports, and economic uncertainty (Pradhan, 2009a). Since the state owns the majority of MNCs, Chinese OFDI may respond to government considerations to enhance Chinese defense, political and economic inuence globally, and less to general commercial factors of than assumed by traditional theories of FDI. The emergence of multinationals from India shows similar trends as the Chinese picture, with both the intensity and diversity of Indian OFDI growing rapidly since the 1990s. This was after India reconsidered her economic policies in 1991 and adopted radical economic openness programmes. Over the years, Indian multinationals like their Chinese peers have evolved a broad-based sectoral and regional prole with more inclination towards establishing wholly owned foreign subsidiaries rather than joint ventures. Contrary to China however, easily the most distinguishing feature of Indian multinationals is that they are led by private entrepreneurs. The sectoral composition of Indian OFDI progressed from manufacturing in the 1960s-1970s, to both manufacturing and services in the 1980s, and then became more equally spread across the three broad economic sectors (including natural resources) in the 1990s and 2000s (Pradhan, 2008, 2009a). Though the Indian OFDI stock remains relatively smaller than Chinas, Indian MNCs have shown greater OFDI intensity in recent years. During the global nancial crisis, Indian OFDI fell by 6.3 percent in 2008 to $16.7 billion from the historic record of

$17.8 billion in 2007 (Pradhan, 2009b). This does not appear surprising since except for a few public sector rms operating in the energy sector, private enterprises account for the bulk of Indian OFDI and are therefore largely driven by market parameters and business opportunities rather than geo-strategic considerations. The internationalization paths of Brazilian and Russian multinationals also show different characteristics. Russian multinationals entered into OFDI more recently than their counterparts from India and China. With the important exception of Gazprom, Russian OFDI is dominated by privately owned rms in oil, gas and metals sectors and is narrowly focused on the neighboring CIS countries (Filippov, 2010; Kalotay, 2008; Panibratov and Kalotay, 2009). Though the global economic and nancial crisis did not lead to an absolute contraction in Russian OFDI ows between 2007 and 2008, as happened in the case of India, its growth rate nonetheless was reported to have fallen in the rst quarter of 2009. The overseas investment path of Brazilian multinationals was modest in the 1980s and since the late 1990s, it has exhibited a rising but widely uctuating trend (UNCTAD, 2004b). Though Brazilian rms started investing abroad as early as 1970s, their internationalization prole remains weak in scope and depth. Much of the reported OFDI by Brazilian multinationals did not go directly into international production as nearly 68 percent of the stock of Brazilian OFDI in 2005 was located in tax havens (UNCTAD, 2007; Iglesias and Veiga, 2002). The contributions in the special issue The contributions in this special issue engage with recent trends and drivers of OFDI from emerging economies and motives, structures and strategies of their multinational rms. Based on studies of rms and industries as well as aggregate investment trends, especially for Brazil, Russia, India, and China (the BRIC countries), the contributions engage with different aspects of home and host country determinants and outcomes of the more and more intense activities of EMNCs. In different ways, Glauco Arbix; Andrea Goldstein and Fazia Pusterla; Sergey Filippov; and Rajah Rasiah, Peter Gammeltoft and Yang Jiang, all analyze how features of the home country environment condition the activities of EMNCs and also touch upon how home countries may become affected by the overseas activities of their national rms. Arbix analyses the profound transformation of Brazilian production during the 1990s in terms of the accelerated growth in the number of Brazilian-owned multinational companies and the intensity of foreign investment. He shows how during the 1990s enormous changes in business strategy occurred, modifying Brazilian companies historical orientation towards the internal market. The new strategies of internationalization were supported by these companies systematic pursuit of innovative processes. Arbix also argues that internationalization can be supportive of transforming the domestic environment and bringing about industrial restructuring and calls for new policies and public programs to support internationalization. Goldstein and Pusterla study home country determinants of OFDI in an analysis of Brazilian and Chinese outward investment ows. Using annual data for the period 1980-2006 for both countries, they test Dunnings investment development path hypothesis and results show that both China and Brazil are moving towards the third stage of the path, where domestic rms have acquired ownership and other advantages to go abroad and become leading outward investors. They argue that the role of

Emerging multinationals

261

IJOEM 5,3/4

262

governments, institutions and the characteristics of domestic rms in both countries are crucial factors in determining the movement along the path. Filippov shifts the gaze to Russia in a sweeping analysis of the emergence of Russian multinationals. In this analysis too, the emergence of EMNCs is linked to domestic environmental conditions. Filippov traces the evolution of Russian companies and the idiosyncratic path of their formation serves as a background for understanding their internationalization strategies. It relates the empirical evidence with the theoretical discourse and identies the main drivers of internationalization, as well as the geographical preferences of new Russian multinationals. Arbix, Goldstein and Pusterla, and Filippov all underscore the importance of home country policies for both past performance and future potentials of EMNCs. Rasiah, Gammeltoft, and Jiang further analyze this theme by identifying and discussing areas where home country policies can complement rms outward investment activities. They extend the motive-based business theory and establish the pronouncement of a third wave of OFDI from the mid-1990s. They proceed to discuss a set of strategic drivers of OFDI and discuss contemporary home government measures for facilitating OFDI. As this contribution makes clear, governments in emerging economies are increasingly aware of the role OFDI can play as an instrument to deepen the integration into the world economy. The contributions by Erika Barcellos, Alvaro Cyrino and Betania Tanure; Christian Milelli, Francoise Hay and Yunnan Shi; and Cassandra Sweet turn the focus towards features of the host country and how they in various ways condition the activities of EMNCs and in turn may become inuenced or transformed by EMNC activities. Cyrino, Barcellos, and Tanure examine the role of psychic distance and thus consider how the behavior of EMNCs is conditioned by host country environments and distance, measured in various respects, from the home country environments. They nd that while evidence for Brazilian companies conrm, overall, the hypothesis of the Scandinavian process school of internationalization, some companies choose divergent trajectories, initially entering markets that are geographically and psychically more distant. Such companies operate in sectors (commodities or global sectors) where psychic distance is of little importance relative to economic transaction costs. Milelli, Hay, and Shi are particularly concerned with the impact on host country environments in Europe of the increasing presence of Chinese and Indian multinationals. Analyzing the characteristics and behavior of Chinese and Indian MNCs in Europe, they nd that the arrival of these EMNCs was linked to home country constraints, that the large European countries were the most favored destinations, that market access was a major motive, and that the sectoral distribution of investments by Chinese and Indian companies largely reected the comparative advantage of their home country. Finally, in her analysis of Indian pharmaceutical multinationals in Brazil, Sweet considers not only how framework conditions in Brazil and the Latin American region more broadly inuenced the operations and strategies of Indian pharma companies but also the consequences of these operations for the region. She nds that contrary to popular perception, the fact that Indian pharmaceutical rms are accustomed to operating in a weak institutional environment did not confer any specic market advantages. Furthermore, Indian EMNCs have assumed both symbiotic and antagonistic roles, simultaneously cooperating and competing with local rms. The contribution offers a rare region-wide picture of changes occurring across one sector: pharmaceuticals.

Note 1. We include here the 113 countries and territories UNCTAD classies as developing economies excluding LDCs, plus Russia. References Agarwal, J.P. (1985), Pros. and Cons. Third World Multinationals: A Case Study of India, J.C.B. Moshr and Paul Siebeck, Tubingen. Buckley, P.J., Cross, A.R., Tan, H., Liu, X. and Voss, H. (2008), Historic and emergent trends in Chinese outward direct investment, Management International Review, Vol. 48 No. 6, pp. 715-48. Chandler, A.D. (1977), Visible Hand: The Managerial Revolution in American Business, Belknap Press, Cambridge, MA. Child, J. and Rodrigues, S.B. (2005), The internationalization of Chinese rms: a case for theoretical extension?, Management and Organization Review, Vol. 1 No. 3, pp. 381-410. Deng, P. (2004), Outward investment by Chinese MNCs: motivations and implications, Business Horizons, Vol. 47 No. 3, pp. 8-16. Filippov, S. (2010), Russian companies: the rise of new multinationals, International Journal of Emerging Markets, Vol. 5 Nos 3/4, pp. 307-32. Gammeltoft, P. (2008), Emerging multinationals: outward FDI from the BRICS countries, International Journal of Technology and Globalization, Vol. 4 No. 1, pp. 5-22. Gammeltoft, P., Barnard, H. and Madhok, A. (2010), Emerging multinationals, emerging theory: macro- and micro-level perspectives, Journal of International Management, Vol. 16 No. 2. Goldstein, A. (2007), Multinational Companies from Emerging Economies, Palgrave Macmillan, Basingstoke. Iglesias, R.M. and Veiga, P.M. (2002), Promocao de exportacoes via internacionalizacao das rmas de capital brasileiro, O Desao das Exportacoes, Brazilian National Economic and Social Development Bank (BNDES), Rio de Janeiro, pp. 369-446. Kalotay, K. (2008), Russian transnationals and international investment paradigms, Research in International Business and Finance, Vol. 22 No. 2, pp. 85-107. Kumar, K. and Mcleod, M.G. (1981), Multinationals from Developing Countries, Lexington Books, Lexington, MA. Lall, S. (1983), The New Multinationals: The Spread of Third World Enterprises, Wiley, New York, NY. Lecraw, D.J. (1977), Direct investment by rms from less developed countries, Oxford Economic Papers, Vol. 29 No. 3, pp. 442-57. Luo, Y. and Tung, R.L. (2007), International expansion of emerging market enterprises: a springboard perspective, Journal of International Business Studies, Vol. 38, pp. 481-98. Mathews, J.A. (2002), Dragon Multinational: Towards a New Model of Global Growth, Oxford University Press, New York, NY. Panibratov, A. and Kalotay, K. (2009), Russian outward FDI and its policy context, Columbia FDI Proles, No. 1, October 13. Pradhan, J.P. (2008), Indian Multinationals in the World Economy: Implications for Development, Bookwell Publisher, New Delhi. Pradhan, J.P. (2009a), Emerging Multinationals from India and China: Origin, Impetus and Growth, MPRA Paper No. 18210, University Library of Munich, Munich.

Emerging multinationals

263

IJOEM 5,3/4

264

Pradhan, J.P. (2009b), Indian FDI falls in global economic crisis: Indian multinationals tread cautiously, Columbia FDI Perspectives, No. 11, Vale Columbia Center on Sustainable International Investment, Columbia University, Columbia, reprinted in Transnational Corporations Review, Vol. 1 No.4. Ramamurti, R. (2009), What have we learned about emerging market MNEs, in Ramamurti, R. and Singh, J.V. (Eds), Emerging Multinationals in Emerging Markets, Cambridge University Press, Cambridge, MA, pp. 399-426. Rasiah, R., Gammeltoft, P. and Jiang, Y. (2010), Home government policies for outward FDI from emerging economies: lessons from Asia, International Journal of Emerging Markets, Vol. 5 Nos 3/4, pp. 333-57. Sung, Y-W. (1996), Chinese Outward Investment in Hong Kong: Trends, Prospects and Policy Implications, Working Paper, No. 113, OECD Development Centre, Paris. UNCTAD (2004a), China: an emerging FDI outward investor, e-brief, United Nations, New York, NY. UNCTAD (2004b), Outward FDI from Brazil: Poised to Take Off?, Occasional Note, UNCTAD/WEB/ITE/IIA/2004/16, United Nations, New York, NY, 7 December. UNCTAD (2007), Global Players from Emerging Markets: Strengthening Enterprise Competitiveness Through Outward Investment, United Nations, New York, NY. UNCTAD (2009), Word Investment Report 2009: Transnational Corporations, Agricultural Production and Development, United Nations, New York, NY. Vernon, R. (1966), International trade and international investment in the product cycle, Quarterly Journal of Economics, Vol. 80 No. 2, pp. 190-207. Wells, L.T. (1983), Third World Multinationals: The Rise of Foreign Investment from Developing Countries, MIT Press, Cambridge, MA. Wong, J. and Chan, S. (2003), Chinas outward direct investment: expanding worldwide, China: An International Journal, Vol. 1 No. 2, pp. 273-301. (The) World Bank (2010), Global Economic Prospects 2010: Crisis, Finance, and Growth, The World Bank, Brussels. Wu, H.-L. and Chen, C.-H. (2001), An assessment of outward foreign direct investment from Chinas transitional economy, Europe-Asia Studies, Vol. 53, pp. 1235-54. Zhang, Y. (2003), Chinas Emerging Global Businesses: Political Economy and Institutional Investigations, Palgrave Macmillan, New York, NY. About the authors Peter Gammeltoft wrote his PhD dissertation on the development of technological capabilities in the electronics industry in Asia. Prior to pursuing a PhD, he was a Senior Consultant with Accenture. Currently, he is an Associate Professor at the Department of International Economics and Management, Copenhagen Business School, pursuing research interests in globalization and economic and technological change. He has carried out consultancies for the European Commission and the Danish Ministry of Foreign Affairs. His recent publications include: EMNCs, emerging theory: macro- and micro-level perspectives, Journal of International Management, 2010, Vol. 16, No. 2 (with Helena Barnard and Anoop Madhok); Journal of International Management, 2010, Vol. 16, No. 2, special issue on MNCs from emerging economies (Guest Editor with Barnard and Madhok); EMNCs: OFDI from the BRICS countries, International Journal of Technology and Globalisation, 2008, Vol. 4, No. 1: 5-22; International Journal of Technology and Globalisation, 2008, Vol. 4, No. 1, special issue on outward investment from the BRICS-countries (Guest Editor); Knowledge Exchange with Offshore R&D Units: Novo Nordisk, GN Resound and BenQ Siemens Mobile in China, 2009, in Govindan Parayil and Anthony P. DCosta, The New

Asian Innovation Dynamics: China and India in Perspective, Houndmills: Macmillan (with Julie Marie Kjersem); and the Indonesian innovation system at a crossroads, 2006, in B.A. Lundvall, Patarapong Intarakumnerd, and Jan Vang (eds), Asias Innovation Systems in Transition, Edward Elgar Publishing, Cheltenham, pp. 148-77 (with Erman Aminullah). Peter Gammeltoft is the corresponding author and can be contacted at: pg.int@cbs.dk Jaya Prakash Pradhan is an Associate Professor at the Sardar Patel Institute of Economic & Social Research (SPIESR), Ahmedabad. Besides the SPIESR, he has served on the faculties of Institute for Studies in Industrial Development, New Delhi and Gujarat Institute of Development Research, Ahmadabad, and earlier a consultant to the Research and Information System for Developing Countries, New Delhi. He has published three books on internationalization of Indian rms and regional development and over 30 research papers in different journals, including Oxford Development Studies, International Journal of Institutions and Economies, International Journal of Technology and Globalisation, Harvard Asia Quarterly, Revista Economa, Journal of Asian Business, and Singapore Economic Review and South Asia Economic Journal. His current research focuses on issues concerning emerging Indian multinationals and internationalization of Indias knowledge-based industries. His recent publications include: Jaya Prakash Pradhan (2010) Multinationals from the Indian Software Industry, in N.S. Siddharthan and K. Narayanan (eds.) Indian and Chinese Enterprises: Global Trade, Technology and Investment Regimes, Routledge, London & New Delhi, pp. 180-210; Jaya Prakash Pradhan and N. Singh (2009) Outward FDI and knowledge ows: a study of the Indian automotive sector, International Journal of Institutions and Economies, Vol. 1 No.1, pp. 155-186; Pradhab, J.P. (2008) Indian Multinationals in the World Economy: Implications for Development, Bookwell Publisher, New Delhi. Andrea Goldstein has been Deputy Director of the Heiligendamm LAquila Process Support Unit at the OECD since 2008. He was previously with the OECD Directorate for Financial and Enterprise Affairs, the OECD Development Centre and the World Bank Group. Andrea Goldstein research interests include regulatory reform in network industries, the political economy of the global aerospace industry, the impact of the emergence of China and India on other developing countries, and multinationals from emerging, transition and developing countries a topic on which he published Multinational Companies from Emerging Economies Composition, Conceptualization and Direction in the Global Economy (Palgrave 2007, paperback edition 2009). He has published 30 articles in refereed journals, including the Asian Development Review, BNL Quarterly Review, Cambridge Journal of Economics, CEPAL Review, Industrial and Corporate Change, International Journal of Technology and Globalisation, Journal of Chinese Economic and Business Studies, Journal of Industry, Competition and Trade, Journal of World Business, Revue Economique, Transnational Corporations, and The World Economy. During the past few years, Andrea Goldstein has also published op-eds on the Financial Times, Helsingin Sanomat, Le Monde, South China Morning Post, La Repubblica and Corriere della Sera. He is a frequent contributor to the website: www.lavoce.info

Emerging multinationals

265

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints