Are Rising Power Firms changing the rules of international business?

By Rudolf Sinkovics, Mo Yamin, Khalid Nadvi and Yingying Zhang

image by sheelamohan/FreeDigitalPhotos.net

A special section in International Business Review, Volume 23, Issue 4, features 'Rising Powers from Emerging Markets – The Changing Face of International Business'. In their editorial, Rudolf Sinkovics, Mo Yamin, Khalid Nadvi and Yingying Zhang ask whether MNEs from emerging economies are Rising Powers that will change the way 
international business works.

Within broader discussions around the geopolitical and economic rise of large emerging economies, an International Business perspective allows a closer look at the role of new multinational enterprises (MNEs) from these countries, such as Huawei, Tata Motors or Petrobras. These companies are clearly rising and going international: smartphones made by Huawei from China can now be found in countries around the world, Tata Motors from India took over Jaguar Land Rover in the UK, and examples can be continued.

But are these emerging multinationals rising powers in the world of international business? A key question is whether emerging MNEs are simply imitating and catching up with MNEs from more advanced economies, or whether they should be seen as Rising Powers in the sense of challenging established business models and ways of competing in the international markets.

While much of this debate in international business sees emerging MNEs merely as 'copycats' following established international business strategies, more and more findings are calling for a rethink. An example of how emerging MNEs may fundamentally challenge the rules of how companies become successful internationally is the 'fight for the middle'. Companies increasingly compete for large numbers of customers with medium or low income in emerging markets. To be successful in these markets, it may not be necessary - or even be counterproductive - for companies to imitate leading Western MNEs and strive to upgrade production capabilities to compete with high-end products. New business models may be needed to win the fight for the middle - and MNEs from emerging markets may have a leading edge here over their established competitors from advanced economies. In their home markets, many of these new players have become successful with new products that are functional and affordable, even if they may not have all the latest features fashionable in high-end markets. This experience can be a huge advantage in middle and low income markets internationally. In contrast, MNEs from advanced economies would actually need to downgrade their ususal products to appeal to this customer range - which has been observed only rarely so far. Hence, new successful business strategies might be dominated by rising powers from emerging markets.

The contributions to the special section of International Business Review highlight different ways in which emerging MNEs and their business models potentially challenge the rules of international business. For instance, FDI strategies pursued by MNEs from emerging economies investing in Europe can make a stronger contribution to local innovation than FDI from advanced economies, as shown by Giuliani et al. Further, Sinkovics et al explore business formation at the bottom of the pyramid in rural India and draw potential lessons for business models of MNEs entering bottom of the pyramid markets in emerging economies. Other contributions investigate the changing roles of emerging economy firms in global value chains and global production networks: Azmeh and Nadvi find that large Asian manufacturers gain power in global apparel value chains; Liu and Zhang analyse learning processes that enable Taiwanese technology firms to take on different positions in global production networks; and Jean examine factors contributing to functional upgrading of Chinese technology firms in global value chains. Focusing on Chinese outward FDI, Kubny and Voss find differences in the local impact FDI between Chinese firms and MNEs from advanced economies in Vietnam; while Wei Hu and Cui identify corporate governance factors within large Chinese firms that influence their FDI decisions. Taken together, the articles in this special issue point towards a number of ways in which emerging economy MNEs may be changing the face of international business.

For more details, please refer to:
Sinkovics, Rudolf R., Mo Yamin, Khalid Nadvi, and Yingying Zhang Zhang (2014), "Rising powers from emerging markets—the changing face of international business," International Business Review, 23 (4), 675-679. (DOI: 10.1016/j.ibusrev.2014.04.001).
http://dx.doi.org/10.1016/j.ibusrev.2014.04.001

Direct links to individual articles in the special section can be found at the publisher's website or on the Rising Powers and Interdependent Futures website.