The adoption of network-based structures has also helped the development of the new MNEs by making easier the coordination of the international activities. A specific type of managerial skill that becomes critical in accelerated internationalization is the ability to manage effectively organizational combinations such as mergers and acquisitions or strategic alliances. In more recent years, students of the new MNEs have drawn attention to other types of intangible assets.
On the technology side, research has documented that firms in developing, newly industrialized, and upper-middle-income countries face lower hurdles when it comes to adopting new technology than their more established counterparts in rich countries. This is especially the case in industries such as construction, electricity, port operators or telecommunications, in which companies from Brazil, Chile, Mexico, South Korea, Spain, and Dubai, among other countries, have demonstrated a superior ability to borrow technology and organize efficient operations across many markets.
Spanish firms from regulated industries reduced over time their propensity to invest in politically unstable countries, showing that it is easier to move from politically unstable countries to stable ones than the other way around. Thus, intangible assets have played a key role in the rise of the new multinationals, but the assets themselves tend not to be technology and brands, as in the case of traditional multinationals,62 but managerial, organizational, and political in nature. In our recent book63 we have distilled the competitive capabilities of the emerging-market multinationals into seven principles that companies from any country in the world should adopt in order to be ready for the new kind of intense global competition of the 21st century.
First, we argue that action should take precedence over strategy.
What Western Marketers Can Learn from China
The second principle has to do with niche thinking. Companies must follow the path of least resistance into foreign markets, which typically is a narrow niche they can dominate. Later, they can use that niche as a platform or beachhead for mounting an assault on the mainstream of the market.
The third principle involves building up scale fast so as to pre-empt competitors, attract price-sensitive customers, and build up market share. Samsung Electronics is perhaps the company that illustrates this principle best. It bet the farm by investing in huge factories for new products not just once but several times. If scale is important in the global economy, so is the ability to embrace chaos, the fourth principle.
Acer expanded throughout the world without fearing chaos, either externally or internally.
Multinationals as global institution: Power, authority and relative autonomy
It used a network of local partners to minimize risk and maximize adaptation. Today the company is the second largest personal computer brand in the world. In order to sustain rapid growth, and to learn new capabilities along the way, we propose a fifth principle which urges companies to acquire smart, in the dual sense of buying assets that complement its existing capabilities, and doing so at the right time and with a clear integration strategy in mind.
Scale through internal and external growth should enable the company to implement our sixth principle: expand with abandon. We argue that if a company waits to make a foreign move until it is ready, then it has waited too long. Foreign expansion cannot be planned day by day. Companies need to be willing to experiment, to engage in trial-and-error, to expose themselves to new opportunities and ways of doing things. And it is at this point where our seventh, and most important, recommendation comes in. In this new, rapidly-changing global economy companies must abandon the sacred cows.
What brought them success in the past cannot become a hindrance for pursuing the new opportunities that are becoming available around the world. The new MNEs are the result of both imitation of established MNEs from the rich countries—which they have tried to emulate strategically and organizationally—and innovation in response to the peculiar characteristics of emerging and developing countries. The context in which their international expansion has taken place is also relevant.
The new MNEs have emerged from countries with weak institutional environments and they are used to operating in countries with weak property-rights regimes, legal systems, and so on. Experience in the home country became especially valuable for the new MNEs because many countries with weak institutions are growing fast and they had developed the capabilities to compete in such challenging environments. The meager international presence of the new MNEs allowed them to adopt a strategy and organizational structure most appropriate to the current international environment.
In addition, the new MNEs have flourished at a time of market globalization in which, despite the local differences that still remain, global reach and global scale are crucial. The new MNEs have responded to this challenge by embarking on an accelerated international strategy based on external growth aimed at upgrading their capabilities and increasing their global market reach. When implementing this strategy, the new MNEs took advantage of their market position in the home country and, ironically, their meager international presence allowed them to adopt a strategy and organizational structure that happens to be most appropriate to the current international environment in which emerging economies are growing very fast.
It is also important to note that the established MNEs from the rich countries have adopted some of the patterns of behavior of the new multinationals. Increased competitive pressure from the latter in industries such as cement, steel, electrical appliances, construction, banking, and infrastructure has prompted many American and European firms to become much less reliant on traditional product-differentiation strategies and vertically integrated structures. To a certain extent, the rise of networked organizations64 and the extensive shift towards outsourcing represent competitive responses to the challenges faced by established MNEs.
Finally, a special type of new MNE is the so-called born-global firm, which resembles the new MNE in many ways but has emerged from developed countries. Taking all of these developments into account, it is clear that the traditional model of MNE is fading. In effect, globalization, technical change, and the coming of age of the emerging countries have facilitated the rise of a new type of MNE in which foreign direct investment is driven not only by the exploitation of firm-specific competences but also by the exploration of new patterns of innovation and ways of accessing markets.
In addition, the new MNEs have expanded very rapidly, without following the gradual, staged model of internationalization. It is important to note, however, that the decline of the traditional model of the MNE does not necessarily imply the demise of existing theories of the MNE. In fact, the core explanation for the existence of MNEs remains, namely, that in order to pursue international expansion, the firm needs to possess capabilities allowing it to overcome the liability of foreignness; no firm-specific capabilities, no multinationals.
Our analysis of the new MNEs has shown that their international expansion was possible due to some valuable capabilities developed in the home country, including project-execution, political, and networking skills, among other non-conventional ones. Thus, the lack of the classic technological or marketing capabilities does not imply the absence of other valuable capabilities that may provide the foundations for international expansion.
It is precisely for this reason that the new MNEs are here to stay. We use our own and third-party cookies to offer you a pleasant experience and display to users advertising related with your preferences, based on analysis of your browsing habits. By continuing to browse this website you agree to their use. You can change the cookie settings or obtain further information by accessing our cookies policy. Click Enter. Login Profile.
Es En. Economy Humanities Science Technology. Multimedia OpenMind books Authors. Scientific Insights. On the other hand, the Brazilian manufacturing sector has poorly adapted itself to the presence of an increasingly mighty China, revealing a Brazilian market unprepared to compete on equal terms with Chinese Multinational Corporations MNCs Amorim There is, indeed, a perception that Brazil has a huge difficulty to include new sectors in its partnership with China.
In fact, trade between Brazil and China has been unequal in terms of added value since the beginning of this relationship, almost forty years ago. China has been trading in autos, motorcycles, aircraft and aircraft parts, electronics, and agro-, bio-, nano-, and information technologies Shambaugh , In this context, Chinese MNCs have found great ways to increase their trade and investment presence in Brazil, generating a highly favorable situation for Chinese businesses. Furthermore, in commercial terms, deviations of market both inside and outside Brazil in favor of China have frequently been observed Gallaguer and Porzecanski , In the productive sector, some analysts believe that there are serious risks of deindustrialization in some specific sectors in Brazil caused by the presence of Chinese manufactured products made in Brazil or in China.
More worryingly, finally, business networks are being established, leading to more Brazilian technological dependence on China Macedo Faced with this situation, it would be necessary to know if Brazil would be seeking to expand its total factor productivity TFP Canuto , moving up in industrial, services, and agricultural value chains, "toward higher value-added activities that require more complex technologies, more skilled human capital and intangible assets such as organizational and project creation capabilities" Canuto It would also be important to understand how China would intervene in such process.
Brazilian agents and researchers would have to understand structures and implications of Chinese international insertion better in order to increase Brazilian chances of adapting itself and seizing opportunities that would be more conformed to its productive interests. Therefore, Brazil could not simply import or imitate existing technologies or capabilities, including those offered by China, anymore, but it would need to create its own Canuto Through the use of Institutional theory of International Relations Keohane and Nye ; Keohane , this study aims at understanding how some key Chinese MNCs have been operating in Brazil over the past ten years, and whether how and why they would be leading to an increase in the asymmetries between the two countries.
The specific purposes of this paper are: i to understand strategies used by Chinese MNCs in Brazil; ii to examine, through empirical research, the internationalization process of Chinese MNCs in Brazilian energy and telecommunications sectors; and iii to assess opportunities and risks posed by the increasing presence of Chinese MNCs in Brazil. This work argues that Brazil-China relations are characterized by asymmetric interdependence due in large part to successful internationalization strategies of Chinese MNCs. In other words, the asymmetrical interdependence that characterizes Brazil-China relations is due to successful Chinese going global strategies, adopted by its MNCs.
In this work, institutions are presented as "formal rules, compliance procedures and standard operating practices that structure relationships between individuals in various units of the polity and the economy" Hall , 20 apud Savigny and Marsden , Multinational corporations MNCs , as a specific kind of institution, are defined here as "a firm that owns and manages economic units in two or more countries.
Most frequently, it entails foreign direct investment FDI by a corporation and the ownership of economic units services, extractive industries, or manufacturing plants in several countries" Gilpin , In general terms, the main objective of an MNC is to secure the least costly production of goods, goal that could be achieved by acquiring the most efficient locations for production facilities or obtaining taxation concessions from host countries Gilpin , According to some Institutionalists, institutions are not always efficient and cooperation does not always generate more profits.
For Keohane and Nye, relations of cooperation and interdependence should not be understood only through the prism of effects mutually benefic or equally balanced between the parties. The interdependent relationships often present particular distributive characteristics, influenced by power relations that allocate the gains resulted from exchange unequally.
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This unequal distribution of earnings makes an actor more sensitive or vulnerable than another. The worst result of cooperation between two actors or institutions would be one in which one actor has no viable alternatives in the foreseeable future to change a frame that is not favorable to it, having to bear the costs imposed by changes in the relations with other actors Keohane and Nye , According to Dicken , 61 , MNCs have basic features that have promoted the emergence of new forms of production, income generation and power relations: the ability to coordinate and control multiple processes and transactions in the context of global production networks, the potential to extract advantages from differences in the geographical distribution of production factors, and the potential geographical flexibility, allowing them to transfer resources and operations across locations and countries.
Since the s, in particular, MNCs have acquired new features, accompanying the changes in the modes of production.
The Multinationals and East-West Relations | SpringerLink
Among them, we highlight the fact that MNCs started being considered as business networks that operate in the midst of other business networks networks within networks Dicken , According to Pind Deng , Chinese MNCs tend to acquire strategic assets-those resources and capabilities that are valued by the firm for their potential to contribute to competitive advantage-in international expansion for some particular reasons: i to adapt to the prevailing corporate values and norms; ii to conform to the home country institutional environment; and iii to respond to government's development plan in order to compete successfully in the global landscape.
First, it is affirmed that Chinese MNCs conform themselves to the rules and beliefs of the system in order to acquire legitimacy. Under this argument, Chinese firms are especially motivated to seek legitimacy or approval for their actions from those constituents on which the firms depend for critical resources Oliver apud Deng , Second, Chinese MNCs are constrained by an institutional environment of continuous economic liberalization and gradual institutional transition and substantial roles played by the government: "As part of economic reforms, the Chinese government has maintained political control and also maintained its ability to reward and discipline firms for their adherence to its directives" Deng , In addition, corporate strategic decisions in China are, to a large extent, governed by a mix of political and economic motives Deng , In this sense, the Chinese government has been creating different supports to stimulate strong Chinese firms to invest abroad for the purpose of becoming globally competitive.
Especially since , the "going global" strategy would seek Chinese firms to invest overseas as part of China's overall strategy of joining global competition and adjusting itself to the trend of economic globalization. Additionally, there are several economic factors at play, which can be categorized as less concerned with the environment of the home country and more with the host countries.
As an example, the pull from host countries can be explained by the fact that Chinese investments look attractive to foreign companies trying to finance their projects but unable to access bank financing Tan , China's emergence as a global direct investor entails a number of consequences, which are yet to be understood.
The next section seeks to shed light on the drivers and division-making process of China's investments in Brazil from the perspective of energy and telecommunication sectors. China has become a new investor and credit supplier to the Brazilian market since the second half of the s, giving a new profile of these bilateral relations, and giving some relief to discontentment in the commercial area. In Brazil, Chinese companies at first until invested in industries related to natural resources and energy.
As of , Chinese companies have also invested in the Brazilian manufacturing sector, in particular through the creation of new businesses Greenfield , but also through the acquisition of existing companies including some of European origin Frischtak and Soares The number of Chinese investment projects in Brazil has not ceased growing. The next sections will study the cases of Chinese companies operating in energy and telecom sectors. According to the International Energy Agency IEA , Brazil-China relations in the energy sector have intensified over the past decade due to the increased innovation capacity and generation of investment flows between the two countries.
For that Agency, elements such as the Brazilian abundance of energy resources, China's great potential to finance projects, and the increased Brazilian and Chinese ability to expand their technological capabilities explain the emergence of new business opportunities IEA The IEA also believes in the potential of Sino-Brazilian cooperation in the petrochemical industry due to Brazilian oil reserves and China's ability to fund its exploration and development.
Meanwhile, Petrobras has developed, in recent years, oil exploration technology in deep waters, which China does not have. More recently, the Chinese State Grid Company revealed its interest in settling permanently in Brazil, increasing its investments in the electricity market. Brazil Eletronorte This bid was considered unbeatable and demonstrated Beijing's strong interest in settling permanently in Brazil. The two other bidders offered far more modest proposals: the Spanish group Abengoa-a major investor in transmission lines in Brazil since offered a discount of The consortium formed by Taesa and Alupar offered a discount of 4.
The line should be concluded in January, For some analysts, Chinese enterprises' high capacity to finance businesses in Latin America is due to the fact that they have access to low-cost capital, which allows Chinese state-owned enterprises SOEs to offer lower rates of return for infrastructure projects, which require heavy investments Facchini et al.
State Grid has since then become the owner of 12 transmission concessions in the country, besides being partner with domestic companies in three more concessions, two with Copel and one with Furnas. In the area of electric energy, the company's strategy is to establish a platform for consistent investment in power transmission, but also in power generation and distribution.
State Grid also wants to evaluate the possibility of future investments in wind and solar energy State Grid Brazil Holding This interest relates not only to the demands from the Chinese economic growth itself-that must re-take the momentum with increased domestic consumption in the composition of the country's Gross National Product GNP and with the reheat of European and North American markets-but also to the need China has to diversify its suppliers in order to reduce energy dependence on the Middle East, in particular.
However, the growth rate of these reserves has been slow over the past decade, remaining at an annual average rate of 1. In China, production rose on average 2. In , China imported Source: EIA Since , China has become a net oil importer, and in it was the second largest country oil importer in the world 6.
A particular decision under one system may be hastily interpreted by the unsympathetic affected party on the other side as a calculated, sinister act, although such a decision may be a logical and legitimate consequence of the social system in force. The memories of past grievances real or imagined , the legacy of the Cold War and the difficulty of communication are even more likely to contribute to suspicion and mistrust.
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