1) Differences between EMNEs and developed (300-400words) It is evident that EMNEs has definite differences inadvantages as compared to traditional MNEs. The rapidly growing and substantiallocal markets has offered them platform and cash to expand internationally.However, EMNEs face several disadvantages as compared to traditionalmultinationals due to weak institutional environment and market constraints intheir home countries (Ramamurti and Singh, 2009). This led toEMNEs facing lack of technological-based ownership advantages and managerialcapabilities (Ramamurti and Singh, 2009). Albeit the assertion that developed multinationalshold better ownership advantages such as technological advancement, EMNEs showshigher degree of trans-nationality by means of larger shares of incomings andemployees abroad. Ramamurti and Singh (2009) study shows that many EMNEs fromBrazil and South Africa boasted significant cash flows due to high pricesoffered for their countries’ raw minerals hence they were able enjoy readyaccess to these resources due to their home country’s advantages. Awuah andAnderson (2013) additionally state that EMNEs are theoretically different inrespect of comparative advantage because of their latecomer standing.
As aresult, EMNEs are seen to utilize international expansion as a springboard toacquire strategic resources to compete with existing rivals and overcomingtheir latecomer status (Ramamurti, 2012). Hence, EMNEstypically ply on fast pace of internationalization, which involve aggressiveand risk-taking acquisition to facilitate swift transfer of strategic assetswith the aim to remain internationally competitive (Awuah and Anderson, 2013).Matthews (2006) further suggests that through these acquisitions, EMNEs wereable to acquire accumulated capabilities over time such as economies ofscale. 2) Emerging multinationals and OLI Framework(200-400 words) In the light of the recent aggressiveinternationalization of EMNEs, the OLI framework has unfortunately faced severalcriticisms on whether these conditions remain of theoretical applicability toexplain EMNEs’ investment decisions and practices (Matthews, 2006).
Fundamentally, EMNEs do not have the same competitiveadvantages as compared to traditional MNES. Matthews (2002) indicated thatEMNEs lacks ownership advantages hence they are internationalizing in order toachieve these advantages. In Goldstein & Pusterla research (2010), it waspointed out that China EMNEs relied heavily on locational advantages such asminerals in Brazil and not on the basis of the ‘O’ in the framework. This ledto the notion that EMNEs face the absence of ownership advantages, whichconstitute the main rationale of traditional MNEs expanding internationally (Matthews,2006). This is because EMNEs engage in asset exploration by home augmentation insteadof home exploitation in order to obtain access to strategic or unique resourcesso as to overcome initial resource impediments (Eden and Dai, 2010).This indisputably contradicts the OLI framework, which requires firms topossess pertinent ownership advantages that overweigh the cost of competingabroad (Tsui, 2007). Despite the criticism, Dunning (2006) accepted thatEMNEs face a shortfall in ownership advantages but suggested that ownershipadvantages on the other hand can be stemmed through the nationality of theseEMNEs’ firm whereby country-specific factors can be reinforced into theirownership advantages.
Additionally, the framework is criticized as static as itonly takes into consideration pre-existent advantages and does not elaborate onthe accumulated advantages and experience garnered from international marketinvolvement (Moon and Rohel, 2001). It isconcurred that OLI framework is not suitable to clarify firm activities atmicro-level (Matthews, 2006). However, the framework is still useful as a firstpoint of orientation for emerging market multinationals, as it is adequatelyrobust in elucidating the structure of the economic system at macro-level (He and Wong, 2004). 3) Uppsala Framework The Uppsala model was contrived to discern howinternational operations of firms were developed in incremental stages and atthe same time demarcating decision-making processes to expand internationally (Johanson and Vahlne, 2006). The Uppsalamodel is built upon the concept of market knowledge as it encompassesstep-to-step learning and knowledge appropriation process in conjunction with foreignmarket and its operation (Johanson and Vahlne, 2006). Frynas andMellahi (2015) advocate this view indicating that firm should garner goodknowledge accumulation and learning as it offers better comprehension ofprospects and risks of continual market involvement. Market commitment isanother essential aspect of the model in which company expanding abroad isrequired to carefully allocate appropriate resources or assets to the foreignmarket and usually EMNEs are required to have higher commitment (Frynas and Mellahi, 2015).
As bothmarket knowledge and commitment are relatively comparable and connected, onedecision will become input for subsequent decision (Forsgren, 2002).Thus, the more the firm gather knowledge about the foreign market, the lowerthe existence of perceived risk and there will be high commitment andinvestment in that market (Forsgren, 2002). As a result,the Uppsala explains how firms internationalize progressively and cautiously asit is built based on incremental decisions. The model also highlights the significance ofpsychic distance that is described as factors that prevent or derange firms fromlearning or understanding the foreign environment (Johanson and Vahlne, 2009). Factors canbe differences in business practices, language or culture.
It is also assumedthat firms should expand into markets that are closer to their home country. Therefore,psychic distance influences firm’s market selection (Johanson and Vahlne, 2009). Despite the gradual stages and concepts that themodel entails, it is still being criticized for being too rigid in light oftheir approach during internationalization as the model omits low level ofinvestment and less risky approaches such as franchising (Ramamurti, 2012). Furthermore, the model explainsthe incremental internationalization of firms, which is contrary to theaggressive acceleration expansion method that EMNEs usually undertake (Ramamurti, 2012). However, theUppsala model is able to highlight risks that EMNEs may face which is imperativeto decision-making process (Forsgren, 2002).
Frynas andMellahi (2015) further indicate that despite the model being too generic innature, it is still able to encapsulate issues related to location or strategicchanges, which cover essential contextual aspects of companies expandinginternationally. 4) LLL Model The linkage, leverage, learning (LLL) model wasoriginated due to the critics faced by the OLI framework as it advocates theasset exploration motive that is seen as a springboard perspective (Matthews, 2002). Matthew (2006) developed thismodel to provide pivotal understanding to the accelerated internationalizationdecisions of EMNEs through resource-based analysis. The first aspect is linkage, which understandshow companies decide to leverage into new markets. EMNEs are viewed aslatecomers hence linkage is a mechanism that provides them with apt and readilyaccess to internally lacked assets such as advanced technology or brandreputation through collaborative partnership with foreign firms (Luo and Tung, 2007). Prevalenceof risk due to uncertainty in the market is reduced often through partnership thusit is a popular strategic decision that is implemented by Chinese EMNEs (Morck, Yeung and Zhao, 2008). The second feature,leverage, concentrates on the exploitation of linkage by funneling resourcesand cost advantages together by overcoming impediments and barriers in order toremain internationally competitive (Matthews, 2002). Lastly,learning is a stage established when EMNEs acquire competitive advantages anddynamic capabilities through linkage and leverage strategies and attainknowledge on how to compete on international level (Matthews, 2006).
He and Fallon (2013) illustrate the applicationof LLL model analysis on Tata Motors whereby through the acquisition of JaguarLand Rover, the company was able to enhance its brand reputation andtechnological skills. Furthermore, they were able to leverage their knowledgeto evolve into global players (He and Fallon, 2013). Therefore, the LLL model is able to furnishstrategic intents of EMNEs as well as providing account for the rapid rise ofEMNEs (Matthews, 2006). Hence, the theory reckoned thatany EMNEs, which lack strategic resources, have the possibility to internationalizedin an accelerated manner through integration of the LLL model (Matthews, 2002).