Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Notes on contributors
- Acknowledgements
- Introduction
- Part I Innovation and competitive advantage
- Commentaries on Part I
- Part II Value-chain configuration and competitive advantage
- 5 Value-chain configurations of Brazilian EMNEs
- 6 Value-chain configurations of Russian EMNEs
- 7 Value-chain configurations of Indian EMNEs
- 8 Value-chain configurations of Chinese EMNEs
- Commentaries on Part II
- Part III Mergers and acquisitions and competitive advantage
- Commentaries on Part III
- References
- Index
7 - Value-chain configurations of Indian EMNEs
Published online by Cambridge University Press: 05 April 2013
- Frontmatter
- Contents
- List of figures
- List of tables
- Notes on contributors
- Acknowledgements
- Introduction
- Part I Innovation and competitive advantage
- Commentaries on Part I
- Part II Value-chain configuration and competitive advantage
- 5 Value-chain configurations of Brazilian EMNEs
- 6 Value-chain configurations of Russian EMNEs
- 7 Value-chain configurations of Indian EMNEs
- 8 Value-chain configurations of Chinese EMNEs
- Commentaries on Part II
- Part III Mergers and acquisitions and competitive advantage
- Commentaries on Part III
- References
- Index
Summary
Approaches to explaining the internationalisation of emerging market MNEs and the relevance of value chains
What motivates emerging market firms to venture abroad? A leading approach, the ownership location internalisation (OLI) theory (Dunning, 1988), explains the internationalisation activity of multinational corporations (MNCs) as their attempts to extend their ownership advantages (e.g. proprietary access to a superior production technology or a valuable brand) to overseas markets by exploiting location advantages (locating abroad to access low cost inputs or better serve local markets) and internalising the efficiency gains from economies of scale and scope by integrating the firm’s activities across borders. In short, FDI enables firms to exploit their existing firm-specific assets.
This explanation has limited traction when analysing the internationalisation activity of MNEs from emerging markets (EMs). As latecomers, multinational enterprises from EMs are often more competitive in terms of cost of labour and natural resources compared to mature MNEs from developed markets (Ramamurthi and Singh, 2009a). However, many of these companies lack global experience and so have weak technological and innovation capabilities, have inexperienced managerial and professional expertise and show poor governance and accountability by international standards (Luo and Tung, 2007). Furthermore, to the extent that the cost advantages are generic to all suppliers from other EMs, we can expect such advantages to dissipate over time as the global market shares to EM firms expand and bid up wages in these economies. Thus, Rugman and Li (2007) have questioned the long-term sustainability of such internationalisation based on cost advantages for Chinese firms in the absence of clear ownership advantages.
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- The Competitive Advantage of Emerging Market Multinationals , pp. 132 - 148Publisher: Cambridge University PressPrint publication year: 2013