PowerPoints week 5 Flashcards
New Types of MNEs
Not following the Uppsala internationalization process model
Timing: fast internationalization
Speed: rapid process
Destination: no stages in the entry order
Method: JVs, alliances and acquisition more common
International New Ventures (INV) / Born Globals
International New Ventures (INV):
Business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries.
Changing International Environment
Technological change in ICT
- Reduction of TC of multinational interchange
xx Transport
xx Communication
- Homogenization of some markets
xx Regionalization & globalization - Efficient & affordable logistics
- More business people have been exposed to IB
- International finance & mobile human capital
- RBV of competitive advantage gaining in explanatory power
Stages theory of MNE evolution vs International New Ventures:
Stages theory of MNE evolution:
- MNEs develop after a period of domestic maturation
- Incremental, risk averse and reluctant steps
- Process preserves home market routines
International New Ventures:
- Observe firms skipping stages (radical change)
- Observe very quick
internationalization
-Managers’ knowledge and beliefs not aligned with stage of internationalization
MNE Theory & INVs
Scale & MNE argument:
- Large size often argued to be key to internationalization
- Economies of scale in R&D, production, marketing etc.
- Efficiently manage international communication, transport & info exchange
- Oligopolistic market power
International New Ventures
- INVs are almost always
small organizations
Characteristics of INVs
- High activity in international markets from or near the founding
- Relatively small in scale
- Limited in financial & tangible resources
- Endowed with distinctive intangible resources & capabilities
- Origins & fundamental orientation are strongly international
- Emphasis on differentiation strategies
4 Elements for Sustainable INVs
= A new framework that leads
both theoretical development &
empirical investigation toward greater understanding of INV
Reliance on:
- TC analysis,
- Market imperfections,
- Internalization to explain the existence of the MNE
How ventures gain influence over vital resources without
owning them
How competitive advantage is developed & sustained
INV is a special type of MNE
- Internalization of some transactions
- Low Transaction Cost
- Best performance - Alternative governance structures
- Hybrid structures (licensing&franchising)
- Network structure is more based on trust & moral obligation - Foreign location advantages
- Private (mobile) knowledge - International from incept - Unique resources to be sustainable (RBV)
- Knowledge may not stay unique for long
- Unique FSAs & RBV are needed
- Patents, copyrights
- Imperfect imitability
- Licensing
- Network governance structures
–
1/5 startups in EU are born globals
INVs & Born Globals different characteristics & strategies compared to traditional MNEs
Increasing: INVs and Born Globals key players in IB
Emerging Country: Definition
There is no clear definition of what an emerging country is, but often describes countries with:
- high economic growth
- growing middle class
- high degree of infrastructure investments
- market which is opening up to international trade and investment
Heterogeneity of Emerging Economies
Recognize the heterogeneity of emerging economies by looking at:
- The development of institutions
- The development of infrastructure and factor markets
EMMNE
EMMNE = an international companies from EMs engaged in outward FDI, where they exercise effective control and undertake value-adding activities in one or more foreign countries
EM enterprises benefited tremendously from inward (FDI) internationalization at home by cooperating with global players
- Original equipment manufacturing (OEM)
- Joint ventures
EMMNEs use international expansion as a springboard to reach two goals:
Acquire critical resources to compete more effectively against their global rivals
To overcome market and non-market constrains at home
Internationalization of EMNEs
EMNEs Have/Want
EMMNEs Have: - competitive disadvantages - atecomer disadvantage - domestic institutional constraints - stringent trade barriers
Want:
- counterattack global rivals’ major presence
- receive preferential treatment by home governments
- exploit comp. advantages in other EMs & DEs
DMNEs Have/Want
Have:
• sophisticated
technology
• advanced know-how
Want:
• Financial assets
• To restructure the firm
Unique challenges of EMNEs:
- Lack of international experience & managerial competences
- Lack of reputation in AEs
- Lack of “traditional” ownership advantages
- Weak domestic intitutional environment
- Weak product/process innovation
- Post-springboard, post-acquisition difficulties
EMMNEs have ownership advantages, different from DMMNEs:
- Deep understanding of customer needs
- Ability to function in difficult business environments
- Ability to make products & services at ultra-low costs
- Ability to make ‘good-enough’ products with the right feature-price mix for local customers
EMMNEs go abroad to obtain technologies and brands, primarily for exploitation in their home markets, not abroad
- xx Engaging in strategic asset seeking
