International expansion, knowledge sourcing and technological upgrading. The experience of multinational enterprises from emerging countries in the last decade

The present research project is based on the awareness that in the recent years foreign direct investments (FDI) from emerging economies have significantly grown, from $11 billion in 1990 to $454 billion in 2013, representing around the 32% of the world stock today (UNCTAD, 2014). Although advanced economies still remain the main source of outward FDI, emerging market multinationals (EMNEs) have increasingly attracted attention since they have experienced an unusual internationalization path, often becoming global players in relatively short time (Awate et al. 2014; Ramamurti, 2009). Consistent with the springboard theory, EMNEs’ outward FDI - mainly acquisitions toward advanced markets - are triggered by pull factors, such as brands, technology, design competences, and managerial expertise, in order to acquire strategic assets and resources to compete successfully in the global market (Luo and Tung, 2007; Rui and Yip, 2008). The foremost motivation of the acquisition of strategic assets is the development of technical and innovative capabilities. As a matter of fact, such capabilities have been traditionally identified as key determinants for firms’ competitive advantage (Schumpeter, 1934). Thus, within this context, it is crucial to build an understanding of the knowledge creation and sourcing process that boosts EMNEs’ technological upgrading, identified as one of the most powerful enablers of EMNEs’ ability to compete internationally. This work focuses on EMNEs’ international expansion and their strategies aimed at accessing new knowledge and valuable technological competences through collaborations with foreign actors, i.e. firms, universities and inventors. So the core research question we seek to address is: How do EMNEs behave during their technological upgrading process through international expansion and external knowledge sourcing? The thesis is a collection of four papers, intended to analyze different but complementary aspects of the abovementioned research question. Specifically, in Chapter 1 we present a critical review of the recent literature about EMNEs and the characteristics of their FDI. Namely, we summarize and discuss some of the issues that have attracted most scholarly debate in the international business domain, such as EMNEs’ country- and firm-specific advantages, FDI motivations and modes of entry into foreign markets. We also examine to what extent EMNEs undertake FDI to upgrade their technological capabilities in order to reduce their technological gap with multinationals from advanced markets. In the next two chapters, we empirically analyze the internationalization strategies of EMNEs when they undertake knowledge-intensive acquisitions in advanced markets. In particular, in Chapter 2 we study the relationship between EMNEs’ ownership choices and the main motivation of their international expansion. Our findings suggest that EMNEs prefer to acquire less control and keep the local partner when they invest for seeking knowledge, in order to more easily transfer competences from the target company. In Chapter 3, we focus on the importance of EMNEs’ home-country specific characteristics on the ownership choice decisions, presenting a comparative analysis of Chinese and Indian MNEs. We argue that China and India inherent heterogeneity plays a crucial role in differently shaping the MNEs’ ownership choice. As a result, we find that Chinese MNEs are less likely to acquire control in the target company, compared to Indian firms. Further, the greater the institutional distance between the home and the host country, the larger the difference between Chinese and Indian firms’ decision. In Chapter 4, we explore the extent to which the integration of emerging countries into the global system of innovation represents a channel for their technological upgrading. Using patent data on the innovative activity in the Chinese pharmaceutical industry, we analyze the geographic dispersion of Chinese inventor networks, as a function of the characteristics of the innovative actors. Our findings point out the critical role that foreign universities and research centers may play in the technological upgrading process of emerging countries.