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  • Series: Research Handbooks in Business and Management series x
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Farok J. Contractor

A boxer, facing a heavier opponent, must learn to punch harder. This chapter comprehensively reviews the sources of competitive strength of emerging market multinationals (EMMs). Since most lack firm-specific assets such as internalized knowledge or globally recognized brands, especially in their early international growth, and emanate from less-developed nations, the success of EMMs has to be explained by identifying factors in their home nations and international scope which make these firms internationally competitive. This chapter identifies several including the mindset of top management of EMMs (such as long-term orientation, global or cosmopolitan perspectives, a degree of humility that recognizes the need to catch up by learning from foreign allies and customers, tolerance for ambiguity, and frugality) and home-country cultural traits such as emphasis on relationships, family control, and private equity capital. Other sources of competitiveness may lie in the home-country pool of technical talent and cheap labor, the extensive diasporas of persons of Chinese, Indian and Brazilian origin, and the role of common language as determinants for the geographical pattern of foreign direct investment (FDI) from emerging nations. Since conclusive evidence is still unavailable, many of these factors are proposed as hypotheses for future empirical research.

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Alvaro Cuervo-Cazurra, Klaus Meyer and Ravi Ramamurti

We study how the conditions of the country of origin of a firm influence its internationalization, analyzing emerging economy multinational companies (EMNCs) as a laboratory for extending theory. EMNCs have been observed to vary from advanced-economy MNCs (AMNCs), suggesting that the home context is the critical explanation. We propose relative resource specialization as the mechanism explaining differences and argue that firms in emerging economies develop a lower degree of resource specialization and wider sets of resources in response to underdevelopment at home. These more varied sets of resources lead EMNCs to have lower levels of internationalization and different patterns of foreign expansion than AMNCs.

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Yingqi Wei and Yaoan Wu

This chapter offers a conceptual framework for the institutional distance between home and host country influencing cross-border mergers and acquisitions (CBMAs) by multinational enterprises (MNEs) from emerging economies (EMNEs) in Organisation for Economic Co-operation and Development (OECD) countries. Multinational enterprises are embedded in both their home- and host-country contexts, and, therefore, are affected by the relative position of home to host country institutions. Traditionally it has been claimed that home–host country institutional distance (ID) creates barriers to interactions between headquarters and host-country subsidiaries and between these subsidiaries and local economic agents, and therefore has a negative impact on CBMAs. However, this view fails to take into account the multidimensional nature of the concept of ID. Different dimensions of ID impact CBMAs in different ways. On the basis of the comprehensive framework developed by Berry et al. (2010) that covers eight dimensions of ID (that is, political, economic, financial, knowledge, global connectedness, demographic, administrative and cultural distance), we develop hypotheses of positive relationships between political, economic and knowledge distance, but negative relationships between financial, global connectedness, demographic, administrative and cultural distance and the number of CBMAs by EMNEs in OECD countries. Empirical results confirm that when making strategic location decisions, EMNEs respond favorably to large political, economic and knowledge distance but small global connectedness, administrative, and cultural distance. Financial, demographic and geographical distances are found to play an insignificant role.

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Mauro F. Guillén, Esteban García-Canal and Laura Fernández-Méndez

One of the distinctive features of the international expansion of emerging-market multinationals (EMMs) is that they have been able to successfully enter into and operate in policy unstable countries, an endeavor in which most established multinationals have failed. Building on the case of Orascom Telecom, we argue in this chapter that these companies have not only developed strategies to mitigate policy risk, but also to profit from it, turning risk into something relative. Orascom Telecom invested in risky countries such as North Korea and Algeria, trying to reach win-win agreements with host governments. This case is especially interesting because despite lacking any industry expertise, they managed to become the sixth multinational operator in the telecommunication industry that after their merger with Russian Vimpelcom.