Emerging multinationals from mid-range economies: the influence of institutions and factor markets

TLDR: In this paper, an enriched typology of emerging economies with a focus on mid-range emerging economies, which are positioned between traditional emerging economies and newly developed economies, is proposed.

Abstract: This paper revisits and extends our earlier work (in 2005) in the pages of this journal. We argue that there is a need for more fine-grained understanding of the country context along two dimensions: (1) institutional development and (2) infrastructure and factor market development. Specifically, we propose an enriched typology of emerging economies with a focus on mid-range emerging economies, which are positioned between traditional emerging economies and newly developed economies. Then we examine new multinationals from these mid-range emerging economies that have internationalized both regionally and globally. We outline directions for further research based on this typology in terms of (1) government influence, (2) resource orchestration, (3) market entry, and (4) corporate governance regarding the internationalization strategy of these emerging multinationals from mid-range economies.

Figures

Table 3: Research Themes for Emerging Multinationals

Figure 2: Cluster Analysis of Mid-Range Emerging Economies

Table 1: Cluster Group Means Scores for Institutions and Infrastructure

Figure 1: A New Typology of Emerging Economies

Table 2: Country Institution and Infrastructure Score and Cluster Group Membership

Full text

City, University of London Institutional Repository
Citation: Hoskisson, R. E., Wright, M., Filatotchev, I. and Peng, M. W. (2013). Emerging
Multinationals from Mid-Range Economies: The Influence of Institutions and Factor Markets.
Journal of Management Studies, 50(7), pp. 1295-1321. doi: 10.1111/j.1467-
6486.2012.01085.x
This is the accepted version of the paper.
This version of the publication may differ from the final published
version.
Permanent repository link: https://openaccess.city.ac.uk/id/eprint/13884/
Link to published version: http://dx.doi.org/10.1111/j.1467-6486.2012.01085.x
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Emerging Multinationals from Mid-Range Economies:
The Influence of Institutions and Factor Markets
Robert E. Hoskisson
Jesse H. Jones Graduate School of Business
Rice University
Houston, TX 77005, USA
Tel: +1 (713) 348-2059
E-mail: robert.hoskisson@rice.edu
Mike Wright
Centre for Management Buy-out Research
Imperial College Business School
Exhibition Road
London SW7 2AZ, UK
Tel: +44 (0) 207 589 5111
Email: mike.wright@imperial.ac.uk
and
University of Ghent
Belgium
Igor Filatotchev
Sir John Cass Business School
City University London
London EC1Y 8TZ, UK
Tel: +44 (0) 20 7040 5278
Email: igor.filatotchev@city.ac.uk
and
Vienna University of Economics and Business
Vienna, Austria
Mike W. Peng
Jindal School of Management
University of Texas at Dallas
800 West Campbell Road, SM43
Richardson, TX 75080, USA
Tel: +1 (972) 883-2714
Email: mikepeng@utdallas.edu
September 3, 2012 (by Bob after MP)
This research is supported in part by the George R. Brown Chair in Strategic Management at Rice
University, Ernst & Young, Equistone Partners Europe, the Jindal Chair at UT Dallas, and the National
Natural Science Foundation of China (71132006). We thank Keith Brouthers, Mick Carney, Andrew
Delios (Editor), and Eric Gedajlovic for helpful discussions, and we are grateful to Richard Swartz at Rice
University for his help with the statistical analysis.

2
Emerging Multinationals from Mid-Range Economies:
The Influence of Institutions and Factor Markets
Abstract
This paper revisits and extends our earlier work (Wright, Filatotchev, Hoskisson, and Peng,
2005) in the pages of this Journal. We argue that there is a need for more fine-grained
understanding of the country context along two dimensions: (1) institutional development and (2)
infrastructure and factor market development. Specifically, we propose an enriched typology of
emerging economies with a focus on mid-range emerging economies, which are positioned
between traditional emerging economies and newly developed economies. Then we examine
new multinationals from these mid-range emerging economies that have internationalized both
regionally and globally. We outline directions for further research based on this typology in
terms of (1) government influence, (2) resource orchestration, (3) market entry, and (4) corporate
governance regarding the internationalization strategy of these emerging multinationals from
mid-range economies.

3
Since the publication of our earlier paper (Wright, Filatotchev, Hoskisson, and Peng, 2005) in
this Journal, emerging economies as a whole have continued to gain in prominence both in terms
of their contributions to global GDP as well as to foreign direct investment (FDI). As the
companion article shows, strategy research with a focus on emerging economies has also
continued to flourish (Xu and Meyer, 2013). It is gratifying to be informed that Wright et al.
(2005) has not only become the most cited Journal of Management Studies (JMS) paper focusing
on emerging economies, but also one of the most cited JMS papers since 2005. In this follow-up
paper, our guiding question is: What is the most important development in both strategy research
and practice on emerging economies that has now become a crucial component of the literature
that deserves our attention?
In writing the 2005 paper, which was the introduction to a JMS special issue on “Strategy
Research in Emerging Economies: Challenging the Conventional Wisdom”, we were building
upon an earlier special research forum (SRF) of the Academy of Management Journal (AMJ). In
that AMJ SRF, two of us (Hoskisson and Wright) had been guest editors. The other two of us
(Filatotchev and Peng) had contributed papers covering varying strategic characteristics of
emerging economies, notably on downsizing in Eastern Europe (Filatotchev et al., 2000) and
managerial ties in China (Peng and Luo, 2000), respectively. The editors’ introduction to that
AMJ SRF (Hoskisson et al., 2000) has also become widely cited.
In Wright et al. (2005), our starting point was the increase in strategy papers focusing on
emerging economies that had occurred in the previous five years. We argued that to “make a
lasting contribution there is a need to consider the extent to which theories and methods used to
study strategy in mature, developed economies are suited to the unique social, political, and
economic contexts as well as firm characteristics of emerging economies” (Wright et al., 2005:

Frequently asked questions

Q1. What contributions have the authors mentioned in the paper "Emerging multinationals from mid-range economies: the influence of institutions and factor markets" ?

This paper revisits and extends their earlier work ( Wright, Filatotchev, Hoskisson, and Peng, 2005 ) in the pages of this Journal. Specifically, the authors propose an enriched typology of emerging economies with a focus on mid-range emerging economies, which are positioned between traditional emerging economies and newly developed economies. Then the authors examine new multinationals from these mid-range emerging economies that have internationalized both regionally and globally. The authors outline directions for further research based on this typology in terms of ( 1 ) government influence, ( 2 ) resource orchestration, ( 3 ) market entry, and ( 4 ) corporate governance regarding the internationalization strategy of these emerging multinationals from mid-range economies. 

Q2. What is the characteristic exemplification of this trend?

A particularly characteristic exemplification of this trend is the oil and gas and telecommunication industries in India, China, and Russia, which are dominated by holding companies such as Gazprom and PetroChina. 

Q3. What are the main factors that influence the entry of firms into foreign markets?

Institutions in host countries, which affect transaction costs and resource access capabilities of firms, significantly shape firms’ market entry strategies and modes (Guler and Guillen, 2010; Meyer et al., 2009a). 

Q4. Why are SOEs often obstructed in developed economies?

Because SOEs are often perceived as manifestations of national interests, international expansions of SOEs are oftentimes obstructed due to concerns over national security. 

Q5. What are the main reasons why firms in Brazil and India have been forced to invest overseas?

For instance, in Brazil, bureaucratic regulations and heavy taxation on domestic earningshave created incentives for firms to invest overseas, especially to tax havens such as the BVI and Cayman Islands. 

Q6. What are the main factors that influence the internationalization of emerging multinationals?

Governance factors, such as ownership structure and types of dominant owners, board characteristics, and executive compensation, may have not only a significant impact on the internationalization strategies of emerging multinationals, but also determine performance outcomes of these strategic decisions. 

Q7. What did Tata Motors do to continue its emergence in the global automobile industry?

Tata Motors pursued the acquisition of Jaguar and Land Rover to continue its emergence in the global automobile industry that had previously included the acquisition of Daewoo and Hispano (light trucks). 

Q8. What are the characteristics of Indian firms that were able to develop into worldwide service firms?

These firms initiated as sources for other firms to do business process outsourcing in India and then were able to develop into worldwide service firms given the well-developed educational institutions besides the initial conditions associated with Indian society such as good language skills and available labor. 

Q9. What is the main reason why the acquisitions were made possible?

These acquisitions were largely made possible by Brazilian Development Bank (BNDES), which supports Brazilian firms in developing their international operations and allows them to increase their bids relative to competing bids (Hope, Thomas, and Vyas, 2011; Samora, 2011). 

Q10. What are the main reasons why managers and firms in Brazil, India, and China have turned their?

in response to unfriendly home country institutions, many managers and firms inRussia, India, and China have made a rational decision by turning their operations at home into “subsidiaries” of foreign firms registered in the likes of Cyprus, Mauritius, Hong Kong, and the BVI. 

Q11. What is the main reason why managers and firms in Russia and China worry about political instability?

In Russia and China, some managers and firms—especially in the private sector—worry about political instability, which may result in the expropriation of their assets. 

Q12. What can be done to help develop understanding of the spectrum of institutional factors underpinning the different?

Appreciation of the variety of institutional factors underpinning the different mid-range emerging economies can help develop understanding of the spectrum of governance models observed in these economies and the implications for internationalization.