Starting from 1980s the increasing growth of commercial relationships between firms from different countries has lead to the rise of several multinational companies (MNCs). Generally speaking, a MNC is a company with a global strategy which has its headquarter in the home country and one or more subsidiaries in at least one foreign country.
While the majority of MNCs today is from developedcountries, in the past decade there has been an increase in number of MNCs from developing countries. According to a study by Ernst&Young (May 2008), these are claiming growing share of the global market, manufacturing and consuming themselves high-technology products and establishing their production bases abroad, most often in other developing countries. This phenomenon is called “Globalization2.0” and refers to the trend of having developing countries-MNCs performing at levels comparable to those of their industrialized nations' competitors. Among the global Top20 on the stock market, 8 companies are from emerging countries. Nevertheless, there is a sharp distinction between the BRIC countries (Brazil, Russian Federation, India and China) and other developing countries: the firstones represent 53% in number among the world’s top 1000 companies.
For a country to be classified by the UN as a “developing country”, it must meet three criteria: a low-income criterion, a human resource weakness criterion and an economic vulnerability criterion. Among developing countries there are now considerable differences between the catching-up countries (e.g. newly industrializedcountries) and falling behind, less developed countries.
Developing countries-MNCs tend to be less competitive than developed countries-MNCs because of underdeveloped institutions and problematic environments. They have smaller size, less cutting-edge technology and less sophisticated resources. But empirical analysis shows that when both types of MNCs operate in countries with difficult governanceconditions (poor regulatory quality, corruption, inefficient market mechanisms, etc.) the first ones can gain a competitive advantage since they are more used to operate in such conditions with respect to the others. Both types of MNCs face difficulties in their internationalization but developing country-MNCs are most prevalent among the largest foreign firms in LDCs (least-developed countries).
Theimplication for this is that managers of developing countries-MNCs can better select foreign countries in which to expand and become leading investors in those countries. In comparison with developed countries-MNCs, developing countries-MNCs mainly meet the following disadvantages:
* They have less ownership in areas such as branding, advertising and technology;
* Host governments tend tofavor the establishment of developed countries-MNCs that are believed to bring more advanced technology to the nation;
* Consumers tend to prefer products provided by foreign firms from developed countries;
* They have to compete against well-established foreign MNCs.
On the contrary, in their home countries developing country-MNCs experience these advantages:
* They know theirclients better
* Their production and distribution facilities are better adapted to the conditions of the country
* They know how to move in the challenging institutional environment
The familiarity with such conditions and the expertise in managing offer developing countries -MNCs a huge potential to become stronger than their industrialized nations counterparts in LDCs. This concept isempirically supported by the 2005 World Bank’s Global Development Finance Report that indicates that firms from China, Russia, India, Malaysia and South Africa have comparative advantages in LDCs in the form of: greater managerial experience with economical, political and legislative conditions in the host country, cultural similarities, geographical proximity, managers who are indigenous to the...
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