International expansion of emerging market enterprises: A springboard perspective

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INTRODUCTION

International expansion of emerging market enterprises: A springboard perspective Yadong Luo1 and Rosalie L Tung2 1 Department of Management, School of Business Administration, University of Miami, Coral Gables, USA; 2Faculty of Business Administration, Simon Fraser University, Burnaby, Canada

Correspondence: Yadong Luo, Department of Management, School of Business Administration, University of Miami, 414 Jenkins Building, Coral Gables, FL 33124-9145, USA. Tel: þ 1 305 284 4003; Fax: þ 1 305 284 3655; E-mail: [email protected]

Abstract In this article, we present a springboard perspective to describe the internationalization of emerging market multinational corporations (EM MNEs). EM MNEs use international expansion as a springboard to acquire strategic resources and reduce their institutional and market constraints at home. In so doing, they overcome their latecomer disadvantage in the global stage via a series of aggressive, risktaking measures by aggressively acquiring or buying critical assets from mature MNEs to compensate for their competitive weaknesses. We discuss unique traits that characterize the international expansion of EM MNEs, and the unique motivations that steer them toward internationalization. We further delineate peculiar strategies and activities undertaken by these firms in pursuit of international expansion, as well as internal and external forces that might compel or facilitate their propulsion into the global scene. We finally explain the risks and remedies associated with this international ‘springboarding’ strategy and highlight major issues meriting further investigation. Journal of International Business Studies (2007) 38, 481–498. doi:10.1057/palgrave.jibs.8400275 Keywords: emerging market multinationals; springboard; international expansion

Received: 11 January 2007 Accepted: 11 January 2007 Online publication date: 19 April 2007

Introduction The past two decades have witnessed rapid growth and remarkable transformation in emerging economies. According to the World Investment Report 2005 (UNCTAD, 2005: 34), of the top six most attractive global business locations five are emerging economies (China, India, Russia, Brazil, and Mexico). Unlike the early path of internationalization for multinational enterprises (MNEs) from advanced markets (e.g., US, Europe and Japan) and newly industrialized economies (e.g., Korea, Singapore, Hong Kong and Taiwan), emerging economy enterprises have benefited tremendously from inward internationalization at home by cooperating (via original equipment manufacturing (OEM) and joint venture in particular) with global players who have transferred technological and organizational skills, allowing emerging market enterprises to undertake outward internationalization later in some unconventional ways. Although developed country MNEs remain the major source of outward foreign direct investment (FDI) today, outflows from developing and emerging economy MNEs