IDEAS home Printed from https://ideas.repec.org/a/unc/tncjou/63.html
   My bibliography  Save this article

Rapid FDI of emerging market firms: foreign participation and leapfrogging in the establishment chain

Author

Listed:
  • Yuanyuan Li
  • John Cantwell

Abstract

This research explores the enablers of emerging-market firms (EMFs) leapfrogging in the internationalization process. Although many studies on rapid internationalization focus on exporting activities, we expand the concept to a higher-commitment entry mode: foreign direct investment (FDI). In addition, we investigate the role of an understudied force, foreign multinational enterprises (MNEs) in emerging markets, in enabling rapid internationalization of EMFs. Our hypotheses are tested using 1,612 first-time outward FDI projects from China between 2000 and 2014. The largely supported results suggest that minority foreign ownership and colocation with foreign MNEs allow EMFs to leapfrog certain stages in the establishment chain. Our findings offer alternative explanations, besides the government steward logic, to EMFs’ international expansion and contribute to the understanding, from a policy standpoint, that encouraging foreign-local partnerships is conducive to host-country industrial upgrading.

Suggested Citation

  • Yuanyuan Li & John Cantwell, . "Rapid FDI of emerging market firms: foreign participation and leapfrogging in the establishment chain," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    • Handle: RePEc:unc:tncjou:63
    as

    Download full text from publisher

    File URL: https://unctad.org/system/files/non-official-document/diaeia2021d1a3_en.pdf?repec
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Koen De Backer & Leo Sleuwaegen, 2003. "Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(1), pages 67-84, February.
    2. Brian J. Aitken & Ann E. Harrison, 2022. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 6, pages 139-152, World Scientific Publishing Co. Pte. Ltd..
    3. Jan Johanson & Jan-Erik Vahlne, 2009. "The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(9), pages 1411-1431, December.
    4. Stephanie A. Fernhaber & Patricia P. McDougall & Benjamin M. Oviatt, 2007. "Exploring the Role of Industry Structure in New Venture Internationalization," Entrepreneurship Theory and Practice, , vol. 31(4), pages 517-542, July.
    5. Gary A Knight & S Tamar Cavusgil, 2004. "Innovation, organizational capabilities, and the born-global firm," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(2), pages 124-141, March.
    6. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    7. Minyuan Zhao, 2006. "Conducting R& D in Countries with Weak Intellectual Property Rights Protection," Management Science, INFORMS, vol. 52(8), pages 1185-1199, August.
    8. Patibandla, Murali & Petersen, Bent, 2002. "Role of Transnational Corporations in the Evolution of a High-Tech Industry: The Case of India's Software Industry," World Development, Elsevier, vol. 30(9), pages 1561-1577, September.
    9. David J. Teece, 2008. "Technology Transfer By Multinational Firms: The Resource Cost Of Transferring Technological Know-How," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 1, pages 1-22, World Scientific Publishing Co. Pte. Ltd..
    10. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 577-598.
    11. Ram C. Acharya & Wolfgang Keller, 2009. "Technology transfer through imports," Canadian Journal of Economics, Canadian Economics Association, vol. 42(4), pages 1411-1448, November.
    12. Ciravegna, Luciano & Majano, Sara B. & Zhan, Ge, 2014. "The inception of internationalization of small and medium enterprises: The role of activeness and networks," Journal of Business Research, Elsevier, vol. 67(6), pages 1081-1089.
    13. Otto Andersen, 1993. "On the Internationalization Process of Firms: A Critical Analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 24(2), pages 209-231, June.
    14. Deng, Ping, 2009. "Why do Chinese firms tend to acquire strategic assets in international expansion?," Journal of World Business, Elsevier, vol. 44(1), pages 74-84, January.
    15. Shameen Prashantham & Charles Dhanaraj, 2015. "MNE ties and new venture internationalization: Exploratory insights from India," Asia Pacific Journal of Management, Springer, vol. 32(4), pages 901-924, December.
    16. Luo, Yadong & Zhang, Huan, 2016. "Emerging Market MNEs: Qualitative Review and Theoretical Directions," Journal of International Management, Elsevier, vol. 22(4), pages 333-350.
    17. Klevorick, Alvin K. & Levin, Richard C. & Nelson, Richard R. & Winter, Sidney G., 1995. "On the sources and significance of interindustry differences in technological opportunities," Research Policy, Elsevier, vol. 24(2), pages 185-205, March.
    18. Prashantham, Shameen & Kumar, K & Bhattacharyya, Sumelika, 2019. "International New Ventures from Emerging Economies: Network Connectivity and Legitimacy Building," Management and Organization Review, Cambridge University Press, vol. 15(3), pages 615-641, September.
    19. Luo, Yadong & Child, John, 2015. "A Composition-Based View of Firm Growth," Management and Organization Review, Cambridge University Press, vol. 11(3), pages 379-411, September.
    20. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    21. Yadong Luo & Rosalie L Tung, 2007. "International expansion of emerging market enterprises: A springboard perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 481-498, July.
    22. Zhenzhen Xie & Jiatao Li, 2018. "Exporting and innovating among emerging market firms: The moderating role of institutional development," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(2), pages 222-245, February.
    23. Bruce Kogut & Udo Zander, 1993. "Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 24(4), pages 625-645, December.
    24. Jan Johanson & Jan-Erik Vahlne, 1977. "The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 8(1), pages 23-32, March.
    25. Verbeke, Alain & Kano, Liena, 2015. "The New Internalization Theory and Multinational Enterprises from Emerging Economies: A Business History Perspective," Business History Review, Cambridge University Press, vol. 89(3), pages 415-445, October.
    26. Liu, Xiaohui & Gao, Lan & Lu, Jiangyong & Lioliou, Eleni, 2016. "Does learning at home and from abroad boost the foreign subsidiary performance of emerging economy multinational enterprises?," International Business Review, Elsevier, vol. 25(1), pages 141-151.
    27. Sourafel Girma, 2005. "Absorptive Capacity and Productivity Spillovers from FDI: A Threshold Regression Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 281-306, June.
    28. Lingyun Huang & Xiaming Liu & Lei Xu, 2012. "Regional Innovation and Spillover Effects of Foreign Direct Investment in China: A Threshold Approach," Regional Studies, Taylor & Francis Journals, vol. 46(5), pages 583-596, August.
    29. S Tamer Cavusgil & Gary Knight, 2015. "The born global firm: An entrepreneurial and capabilities perspective on early and rapid internationalization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 46(1), pages 3-16, January.
    30. Johan Wiklund & DEAN Shepherd, 2003. "Knowledge‐based resources, entrepreneurial orientation, and the performance of small and medium‐sized businesses," Strategic Management Journal, Wiley Blackwell, vol. 24(13), pages 1307-1314, December.
    31. John Cantwell & Ram Mudambi, 2005. "MNE competence‐creating subsidiary mandates," Strategic Management Journal, Wiley Blackwell, vol. 26(12), pages 1109-1128, December.
    32. Amann, Edmund & Cantwell, John (ed.), 2012. "Innovative Firms in Emerging Market Countries," OUP Catalogue, Oxford University Press, number 9780199646005.
    33. Jan Johanson & Finn Wiedersheim‐Paul, 1975. "The Internationalization Of The Firm — Four Swedish Cases 1," Journal of Management Studies, Wiley Blackwell, vol. 12(3), pages 305-323, October.
    34. Byungchae Jin & Francisco García & Robert Salomon, 2019. "Inward foreign direct investment and local firm innovation: The moderating role of technological capabilities," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(5), pages 847-855, July.
    35. Luo, Yadong & Bu, Juan, 2018. "Contextualizing international strategy by emerging market firms: A composition-based approach," Journal of World Business, Elsevier, vol. 53(3), pages 337-355.
    36. Paul E. Bierly & Fariborz Damanpour & Michael D. Santoro, 2009. "The Application of External Knowledge: Organizational Conditions for Exploration and Exploitation," Journal of Management Studies, Wiley Blackwell, vol. 46(3), pages 481-509, May.
    37. Chetty, Sylvie & Johanson, Martin & Martín Martín, Oscar, 2014. "Speed of internationalization: Conceptualization, measurement and validation," Journal of World Business, Elsevier, vol. 49(4), pages 633-650.
    38. Farok J. Contractor, 2013. "“Punching above their weight”," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 8(4), pages 304-328, September.
    39. Liu, Xiaohui & Buck, Trevor, 2007. "Innovation performance and channels for international technology spillovers: Evidence from Chinese high-tech industries," Research Policy, Elsevier, vol. 36(3), pages 355-366, April.
    40. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 190-207.
    41. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    42. Klaus E Meyer & Evis Sinani, 2009. "When and where does foreign direct investment generate positive spillovers? A meta-analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(7), pages 1075-1094, September.
    43. Love, James H. & Roper, Stephen & Zhou, Ying, 2016. "Experience, age and exporting performance in UK SMEs," International Business Review, Elsevier, vol. 25(4), pages 806-819.
    44. Cui, Lin & Meyer, Klaus E. & Hu, Helen Wei, 2014. "What drives firms’ intent to seek strategic assets by foreign direct investment? A study of emerging economy firms," Journal of World Business, Elsevier, vol. 49(4), pages 488-501.
    45. Mohr, Alex & Batsakis, Georgios, 2018. "Firm resources, cultural distance and simultaneous international expansion in the retail sector," International Business Review, Elsevier, vol. 27(1), pages 113-124.
    46. Peter Hertenstein & Dylan Sutherland & John Anderson, 2017. "Internationalization within networks: Exploring the relationship between inward and outward FDI in China’s auto components industry," Asia Pacific Journal of Management, Springer, vol. 34(1), pages 69-96, March.
    47. Sea-Jin Chang & Jay Hyuk Rhee, 2011. "Rapid FDI expansion and firm performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 42(8), pages 979-994, October.
    48. Prashantham, Shameen & Zhou, Abby Jingzi & Dhanaraj, Charles, 2020. "Depth vs. Breadth: Network Strategy in Emerging Markets," Management and Organization Review, Cambridge University Press, vol. 16(2), pages 229-260, May.
    49. Nigel Driffield & James H Love, 2007. "Linking FDI motivation and host economy productivity effects: conceptual and empirical analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(3), pages 460-473, May.
    50. Ziliang Deng & Ruey-Jer Bryan Jean & Rudolf R. Sinkovics, 2017. "Polarizing Effects of Early Exporting on Exit," Management International Review, Springer, vol. 57(2), pages 243-275, April.
    51. Nicole Coviello, 2015. "Re-thinking research on born globals," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 46(1), pages 17-26, January.
    52. Gary A Knight & S Tamer Cavusgil, 2004. "Innovation, organizational capabilities, and the born-global firm," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(4), pages 334-334, July.
    53. Benjamin M Oviatt & Patricia P McDougall, 2005. "The internationalization of entrepreneurship," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 36(1), pages 2-8, January.
    54. Yadong Luo & Rosalie L Tung, 2018. "A general theory of springboard MNEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(2), pages 129-152, February.
    55. Thompson, Edmund R., 2002. "Clustering of Foreign Direct Investment and Enhanced Technology Transfer: Evidence from Hong Kong Garment Firms in China," World Development, Elsevier, vol. 30(5), pages 873-889, May.
    56. Klaus E Meyer & Yuan Ding & Jing Li & Hua Zhang, 2014. "Overcoming distrust: How state-owned enterprises adapt their foreign entries to institutional pressures abroad," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(8), pages 1005-1028, October.
    57. Aurora Teixeira & Cátia Coimbra, 2014. "The determinants of the internationalization speed of Portuguese university spin-offs: An empirical investigation," Journal of International Entrepreneurship, Springer, vol. 12(3), pages 270-308, September.
    58. Vikas Kumar & Deeksha Singh & Anish Purkayastha & Manish Popli & Ajai Gaur, 2020. "Springboard internationalization by emerging market firms: Speed of first cross-border acquisition," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(2), pages 172-193, March.
    59. Peter J Buckley & Jeremy Clegg & Chengqi Wang, 2002. "The Impact of Inward FDI on the Performance of Chinese Manufacturing Firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(4), pages 637-655, December.
    60. Daphne W Yiu & ChungMing Lau & Garry D Bruton, 2007. "International venturing by emerging economy firms: the effects of firm capabilities, home country networks, and corporate entrepreneurship," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 519-540, July.
    61. Chengqi Wang & Junjie Hong & Mario Kafouros & Mike Wright, 2012. "Exploring the role of government involvement in outward FDI from emerging economies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 43(7), pages 655-676, September.
    62. Phillips McDougall, Patricia & Shane, Scott & Oviatt, Benjamin M., 1994. "Explaining the formation of international new ventures: The limits of theories from international business research," Journal of Business Venturing, Elsevier, vol. 9(6), pages 469-487, November.
    63. Peter J. Buckley, 2010. "Foreign Direct Investment, China and the World Economy," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-24832-8, March.
    64. Weilei (Stone) Shi & Sunny Li Sun & Daying Yan & Zhu Zhu, 2017. "Institutional fragility and outward foreign direct investment from China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(4), pages 452-476, May.
    65. Stephanie Lu Wang & Yadong Luo & Xiongwen Lu & Jinyun Sun & Vladislav Maksimov, 2014. "Autonomy delegation to foreign subsidiaries: An enabling mechanism for emerging-market multinationals," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(2), pages 111-130, February.
    66. Y Wei & X Liu, 2006. "Productivity spillovers from R&D, exports and FDI in China's manufacturing sector," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(4), pages 544-557, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rishika Nayyar & Rajdeepa Maity, . "Overcoming institutional voids in the home country for internationalization: an exploratory examination of institutional strategies of Indian MNEs," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    2. Ruilin Yang & Harald Bathelt, 2022. "China's outward investment activity: Ambiguous findings in the literature and empirical trends in greenfield investments," Growth and Change, Wiley Blackwell, vol. 53(1), pages 313-341, March.
    3. Sengupta, Aditi Sarkar & Kleindienst, Ingo & Hutzschenreuter, Thomas, 2023. "Heterogenous internationalization processes of emerging economy MNEs: A review and research agenda," Journal of International Management, Elsevier, vol. 29(3).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gammeltoft, Peter & Cuervo-Cazurra, Alvaro, 2021. "Enriching internationalization process theory: insights from the study of emerging market multinationals," Journal of International Management, Elsevier, vol. 27(3).
    2. Maksimov, Vladislav & Luo, Yadong, 2021. "International springboard as an entrepreneurial act," Journal of World Business, Elsevier, vol. 56(3).
    3. Yadong Luo & Rosalie L Tung, 2018. "A general theory of springboard MNEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(2), pages 129-152, February.
    4. Dzikowski, Piotr, 2018. "A bibliometric analysis of born global firms," Journal of Business Research, Elsevier, vol. 85(C), pages 281-294.
    5. Luo, Yadong & Maksimov, Vladislav & Bu, Juan, 2021. "Making Geographic Dispersion Work for Emerging Market MNEs," Journal of International Management, Elsevier, vol. 27(3).
    6. Rubina Romanello & Maria Chiarvesio, 2019. "Early internationalizing firms: 2004–2018," Journal of International Entrepreneurship, Springer, vol. 17(2), pages 172-219, June.
    7. Fletcher, Margaret & Harris, Simon & Richey, Robert Glenn, 2021. "Retrospective and prospective learning: Accelerating the internationalization process," Journal of World Business, Elsevier, vol. 56(3).
    8. Neil Foster-McGregor, 2012. "Innovation and Technology Transfer across Countries," wiiw Research Reports 380, The Vienna Institute for International Economic Studies, wiiw.
    9. Sengupta, Aditi Sarkar & Kleindienst, Ingo & Hutzschenreuter, Thomas, 2023. "Heterogenous internationalization processes of emerging economy MNEs: A review and research agenda," Journal of International Management, Elsevier, vol. 29(3).
    10. Buckley, Peter J & Cui, Lin & Chen, Liang & Li, Yi & Choi, Yoona, 2023. "Following their predecessors’ journey? A review of EMNE studies and avenues for interdisciplinary inquiry," Journal of World Business, Elsevier, vol. 58(2).
    11. Nuno Calheiros-Lobo & José Vasconcelos Ferreira & Manuel Au-Yong-Oliveira, 2023. "SME Internationalization and Export Performance: A Systematic Review with Bibliometric Analysis," Sustainability, MDPI, vol. 15(11), pages 1-36, May.
    12. Oliva, Fábio Lotti & Teberga, Pedro Marins Freire & Testi, Lucas Israel Oliveira & Kotabe, Masaaki & Giudice, Manlio Del & Kelle, Peter & Cunha, Miguel Pina, 2022. "Risks and critical success factors in the internationalization of born global startups of industry 4.0: A social, environmental, economic, and institutional analysis," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    13. D’Angelo, Alfredo & Buck, Trevor, 2019. "The earliness of exporting and creeping sclerosis? The moderating effects of firm age, size and centralization," International Business Review, Elsevier, vol. 28(3), pages 428-437.
    14. Sinéad Monaghan & Esther Tippmann, 2018. "Becoming a multinational enterprise: Using industry recipes to achieve rapid multinationalization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(4), pages 473-495, May.
    15. Danchi Tan & Weichieh Su & Joseph T. Mahoney & Yasemin Kor, 2020. "A review of research on the growth of multinational enterprises: A Penrosean lens," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 498-537, June.
    16. Christopher Williams & Ana Colovic & Jiqing Zhu, 2016. "Foreign Market Knowledge, Country Sales Breadth And Innovative Performance Of Emerging Economy Firms," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 20(06), pages 1-25, August.
    17. Liu, Ting & Li, Xizhuo, 2022. "How Do MNCs Conduct Local Technological Innovation in a Host Country? An Examination From Subsidiaries' Perspective," Journal of International Management, Elsevier, vol. 28(3).
    18. Xu, Kai & Hitt, Michael A. & Brock, David & Pisano, Vincenzo & Huang, Lulu S.R., 2021. "Country institutional environments and international strategy: A review and analysis of the research," Journal of International Management, Elsevier, vol. 27(1).
    19. Niccolò Pisani & Joan Enric Ricart, 2018. "Offshoring Innovation to Emerging Countries: The Effects of IP Protection and Cultural Differences on Firms’ Decision to Augment Versus Exploit Home-Base-Knowledge," Management International Review, Springer, vol. 58(6), pages 871-909, December.
    20. Ziyi Wei & Quyen T. K. Nguyen, 2020. "Local responsiveness strategy of foreign subsidiaries of Chinese multinationals: The impacts of relational-assets, market-seeking FDI, and host country institutional environments," Asia Pacific Journal of Management, Springer, vol. 37(3), pages 661-692, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unc:tncjou:63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kumi Endo (email available below). General contact details of provider: https://edirc.repec.org/data/unctach.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.