Integration strategies of emerging multinational corporations: Theoretical approach

• DOI: http://doi.org/10.1111/ijet.12088
• Published date: 01 June 2016
• Author: Artur Klimek
• Date: 01 June 2016

doi: 10.1111/ijet.12088

Integration strategies of emerging multinational

corporations: Theoretical approach

Artur Klimek∗

The traditional approach to multinational corporations typically assumes that advanced

economies are sources of foreign direct investment, while emerging economies are merely

passive recipients of the foreign capital. This paper presents a new model of multinational

corporations originating in emerging countries. The new approach assumes that headquarters

are located in a less developed country and production can be internationally dispersed. The

paper attempts to define an optimal strategy of foreign production with respect to different

levels of input prices, productivity of firms and market sizes.

Key wor ds foreign direct investment, heterogeneous firm, emerging country

JEL classification F21, F23

Accepted 6 June2014

1 Introduction

During recent years there has been great interest in multinational corporations (MNCs) from newly

industrialized countries. This was caused by an unprecedented expansion of firms from the so-

called BRIC countries and eastern Europe. The notion of emerging countries is very imprecise

and sometimes embraces highly differentiated economies. In this paper,I w ill designate as emerging

countries those with large growth potential which are home to many firms rapidly expanding abroad.

The change in the global position of firms from newly industrialized countries will have an impact

on the supply chains of individual firms and will also influence the trade connections between

economies. This may also be the factor reducing some of the economic imbalances between North

and South.

The foreign expansion of emerging multinational corporations (EMNCs) has been motivated by

the three main incentives: market access, technology acquisition, and lower production costs. The

last motive may seem intriguing, but in fact numerous Chinese or Polishcorporations seek to reduce

production costs, especially when they operate in very competitive industries.

In this paper, I presume that the main motive of foreign expansion is to acquire strategic assets,

understood by Dunning (1998) as crucial knowledge-related elements of advantage of expanding

firms. Evidence provided by Makino et al. (2002) suggests that abundance of technological assets

in developed countries is a primary motivation for investment by firms from newly industrialized

∗WrocławUniversity of Economics, Wrocław,Poland. Email: artur.klimek@ue.wroc.pl

This project has been financed by the NationalScience Centre according to the decision no. DEC-2011/01/D/HS4/01204.

Earlier versions of this paper were presented at the ETSG Conference 2011 in Copenhagen and IEFS China 2013 in

Shanghai. I would like to express my deepest gratitude to participants of these events for their valuable comments.

International Journal of Economic Theory 12 (2016) 183–196 © IAET 183

International Journal of Economic Theory