Conceptual Approaches to Managing in Emerging Markets

This chapter raised two issues as a basis for structuring our thinking about international business in emerging markets. First, the question is raised regarding whether new theory is needed to study IB in emerging markets, or if existing theories can be extended to cover these geographic and institutional environments adequately. Second, the chapter presents the perspective of emerging markets fitting into global value chains, demonstrating how they fit into both supply chains and demand patterns. So, thinking about strategies for operating a foreign MNE in an emerging market and fitting an EM firm into an international network are both enhanced by looking at the firm(s) in the context of global value chains.

Human Resource Management in Emerging Markets

This chapter introduces human resource management (HRM) in emerging markets and explains that in such contexts HRM is still emerging, and characterized by uncertain and unplanned forms of hybridization. The chapter argues that in each emerging market, HRM will depend on the types of actors present and the behavior of those actors. Accordingly, any generalization about HRM across emerging markets doesn’t make any sense. However, there are certain generalizable mechanisms through which the interactions among different actors occur and how these interactions shape HRM in the given emerging market. The chapter discusses those mechanisms and advocates the need to adopt a nested view in order to fully understand how HRM is practiced in emerging markets.

Regulatory Institutions and Multinational Companies in Emerging Markets

This chapter discusses the role of government policies in fostering, or inhibiting, foreign direct investment (FDI) by multinational companies in emerging nations. Using World Bank data on 149 emerging nations, the chapter examines the impact of government policies and institutions on the magnitude of inward FDI each country receives. Certainly, socioeconomic factors such as the size of the local market, human capital, and skills remain powerful determinants of FDI flows. But, ceteris paribus, the results show that the institutional environment does plays a substantial role in determining the magnitude of FDI inflows received by a nation. Globalization, measured by FDI as well as trade, data, and people flows, is cyclical. But all in all, globalization has seen a massive increase since the 1980s, when a sea change occurred in government policies toward international business. Formerly socialist and inward-oriented policies were almost universally replaced by a liberal free-market posture.

How Technology-Based Firms from India Deal with Legitimacy Challenges in International Markets

Technology based firms from India, an emerging market, seek legitimacy in international markets in order to get access to mission-critical capabilities and resources for growth. Cooperation with internationally established firms and the resulting legitimacy enables emerging market firms to get access to development activities that they can use to substitute for expensive R&D efforts. Technology-based emerging market multinational enterprises do not possess great brands or technologies. They have agility and flexibility based on working with different technologies and their vendors. Developing interoperability between technologies and products and being able to do so is a distinct set of capabilities that enables them to support foreign expansion. As they enhance their expertise by working with diverse set of customers in different stages of the product life cycle, they develop unique skills in systems integration. Some of these companies have acquired firms in developed markets to strengthen their capabilities in product development and to move up the value chain. The dynamics results in the evolution of emerging market firms.

Introduction to Managing in Emerging Markets

This chapter sets the stage for this Handbook by defining the research field of managing in emerging markets. It first discusses the features that normally distinguish emerging economies from the advanced economies of the Triad, including both economic and institutional aspects of development. Second, the chapter reviews alternative definitions of the term in use in scholarly research, and thus the pivotal question: When should a country be considered “emerging”? Third, it presents data on key economic trends that have to led to emerging economies becoming key players in international business, both as a host to inward traders and investors and, more recently, as a source of indigenous businesses that make their mark internationally. The chapter also provides an overview of each chapter in this Handbook within the broader research agenda on managing in emerging markets.

Managing Multinationals in Brazil

Brazil portrays a successful integration of a melting pot of cultures (European, African, Asian, and, of course, American) that entails challenges to multinationals. The idiosyncratic nature of Brazil’s institutional environment—resulting from the still ongoing interplay of so many influences—has led to particular ways of doing business and creative business models. This chapter presents an overview of Brazil’s history, natural environment endowments, cultural traits, and sociodemographic profile, as well as politics and legislation, economy, and infrastructure. Interviews with (foreign and Brazilian) businesspersons reveal opportunities to be exploited and challenges to be dealt with by multinationals that invest in Brazil.

Risk Management for Companies Operating in Emerging Markets

This chapter frames risk management for firms operating in emerging markets by addressing three sets of questions: What are the (drivers of) risks? How does the incidence of these risks depend on the nature of the investment at risk? How should these risks be managed? The answers to these questions are framed in terms of (i) an “inside-out” classification of risks, (ii) specific measures to manage risks, and (iii) the principle of comparative advantage in bearing risk. These then are traced through the risk profiles and risk management possibilities facing “traditional multinational corporations” with operations in emerging markets, as well as MNCs whose global value chains include emerging markets.

Adjustment of MNE Geographic Market Strategy in Responding to the Rise of Local Competitors in an Emerging Market

Emerging economies are characterized by weak institutions but also a very dynamic competitive landscape. This chapter proposes that MNE subsidiaries may have to adjust their geographic market strategies as a response to the rise of local competitors. Information on 25,161 manufacturing subsidiaries exporting from China during 2005–2007 was analyzed to show that the export intensity of an MNE subsidiary first increases and then decreases with the export volume of the subsidiary’s local Chinese competitors in the same industry and with the same destination country. Subsidiaries that are older or more tightly controlled by their MNE parents are less likely to respond to the exporting of their Chinese competitors by changing their exporting intensities. Better developed market-supporting institutions make MNE subsidiaries more sensitive to the impact of Chinese local exporters.

Examining Base of the Pyramid (BoP) Venture Success Through the Mutual Value CARD Approach

Nearly two decades ago, Prahalad and Hart introduced the novel idea that large corporations can both serve the poor customers profitably and help alleviate their poverty. However, the base-of-the-pyramid (BoP) field, as it has come to be called, has struggled to deliver on the initial promise and the dual goal of profit creation and poverty alleviation (creating mutual value). While this mutual value is a useful lens to define and evaluate success of BoP ventures, developing a value proposition from the perspective of the BoP has only received limited attention. To address these shortcomings and to extend the way in which success is viewed from the perspective of the BoP, this chapter introduces the mutual value creation, appropriation, retention, and destruction (CARD) approach using the mutual value lens to analyze the success of BoP ventures. It applies the value CARD framework to four different archetypes of BoP ventures to show how the archetypes help identify important differences in the full value proposition for the BoP and the success of the BoP ventures. The chapter illustrates these differences using examples from the field. It discusses the implications of our new perspective on designing BoP ventures that seek to be sustainable over time, and identifies possible avenues for future research to help fulfill the potential of the BoP framework.

Emerging Markets and the International Investment Law and Policy Regime

Multinational enterprises, including those headquartered in emerging markets, operate within the confines of the international investment law and policy regime. On the one hand, this regime prescribes the extent to which these firms can invest abroad, and it provides various protections for their investments. On the other hand, the regime prescribes increasingly that the operations of these firms need to be conducted in a responsible manner. The relevant standards are formulated by governments. The chapter discusses the rise of the international investment regime, its substantive and procedural content, and how and why the regime has changed over time, paying special attention to issues relating to emerging markets. Accordingly, the focus of this chapter is on the actions of governments, illustrating in the process of the discussion how emerging market multinational enterprises can benefit both from the regime and how they are constrained by it.