EMERGING MARKET MULTINATIONALS AND THE POLITICS OF INTERNATIONALIZATION
INTERNATIONAL BUSINESS REVIEW (IBR) SPECIAL ISSUE
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Submission deadline: 1 June 2021
Peter Gammeltoft, Professor, Copenhagen Business School, Denmark, [log in to unmask]
Andrei Panibratov, Professor, St. Petersburg State University, Russia, [log in to unmask]
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This special issue aims to enhance the understanding of the contemporary role of politics in the global economy and its significance for international business. At a more general level, the special issue aspires to contribute to a better integration of the role of politics and of non-markets strategies into international business theories, dimensions that have so far not been subjected to much systematic treatment.
The focus on outward investment from emerging economies and emerging market multinational enterprises (EMNEs) supports this agenda particularly well. It serves as a laboratory or extreme case to bring out more clearly the different dimensions of the special issue theme and their implications. Issues of politics, policies and institutions are often especially pronounced, both in home and host countries, when we consider EMNEs relative to multinationals from advanced economies (AMNEs). EMNE strategies are becoming entwined with those of governments, political parties, lobbyists, and other formal and informal institutions, in a variety of constellations. In emerging-economy home countries, where market failures and institutional voids tend to be widespread, the state more often than not plays a relatively active role in the economy and EMNE strategies and operating modes are more conditioned by politics, policies and non-market considerations. In advanced-economy host countries, there are often more sensitivities associated with EMNEs than with AMNEs, and political and regulatory responses are more pronounced. In both emerging and developing economy host countries, it is not uncommon for EMNE activities to be underpinned and conditioned by formal or informal interactions between home and host country governments. This special issue aspires to shed more light on the multi-level interrelationships between politics and EMNEs’ internationalization and the non-market agenda for their international strategy.
Over the last decade, outward investment from emerging economies has been steadily rising as a share of total outward investment (Goldstein & Shaw, 2007; Gammeltoft, 2008). Recent backlashes notwithstanding, more and more EMNEs are becoming competitive in an increasing number of markets and sectors on the basis of accumulated technological and managerial skills and abilities to manage global supply chains (Ramamurti & Singh, 2009; Gammeltoft, Barnard & Madhok, 2010). Yet, over the course of the same decade, the conditions for operating across borders have undergone significant changes. Succeeding the global financial crisis, national governments have resorted to interventionist and protectionist measures to safeguard domestic jobs and the competitiveness of national firms. Deglobalization rhetoric has been pronounced in a number of countries where nationalist and populist parties and individuals have elicited significant electoral support. However, the resort to measures impeding the flow of goods, capital, people and information has not been confined to individual countries. Other contemporary events such as the US-China trade and technology war, sanctions against Russia, Brexit, and the Covid-19 pandemic have further compounded some of these challenges.
More generally, the global economy has witnessed a widespread resurgence of politics in the wake of the environmental changes such as the global financial crisis, electoral support for nationalist governments, and the Covid-19 pandemic. This represents a marked shift from the preceding period from the 1990s onward, where neoliberal policies were dominant and there was more widespread consensus about the rules, norms and principles that would promote growth and stability. Today, with a considerably more entropic world order, the models and theories applied for a couple of decades to global economic change may benefit from reconsideration and extension to better take the new political circumstances into account. In recent years, international business theory has developed a much better appreciation of the importance of institutions. Yet, the role of politics and policies is yet to be systematically theorized and has so far been treated primarily as a source of risks and costs.
The increasing role of politics has been particularly pronounced where EMNEs’ expansion and performance are concerned. In the global economy, the locus of financial and political power is shifting towards emerging economies and in emerging economies, both state ownership and political support are essential pillars for the success of many EMNEs (Panibratov & Michailova, 2019). Political and institutional factors over time become embedded within EMNEs, transforming country-specific advantages into firm-specific ones. These political and policy issues associated with EMNEs meet with concern and policy responses, e.g. regarding their motives and competitive behavior (Panibratov, 2012), which leads to the increase of political bargaining between EMNEs and host countries’ governments, with examples such as Huawei in the US, or Gazprom in the EU. Ability to leverage politics constitutes a competitive advantage for EMNEs adding to their competitiveness and flexibility in their cross-border operations. Although economic motivations of EMNEs continuously develop and get more sophisticated, political factors remain an important tool to facilitate their expansion.
The resurgence of politics is manifest at multiple institutional levels, viz. firms, organizations, states, and multinational regimes. Most evidently, national governments have become less intent on integrating with other economies and international regimes and more intent on devising policies to better promote their own national interests, e.g. through protectionist measures and subsidies (Evenett, 2019). Abroad, governments mobilize representations, diplomacy and debt and aid conditionalities in support of commercial goals. More heavy-handed national regulation and incentives in home and host countries affects flows of goods, capital, people and information through both push and pull effects (Avioutskii & Tensaout, 2016). Hence, the global economy has become more adversarial and shifted from a more rule-based and transparent environment towards one that is more transactional and opaque.
At the level of firms, in many countries, the international competitiveness of national firms is more and more becoming a government rather than just a private concern, in particular of course where state-owned companies are involved (Cuervo-Cazurra et al., 2014; Panibratov & Michailova, 2019). EMNEs adjust their strategies to better deal with the new and more volatile political and regulatory environment and attendant risks and uncertainties (John & Lawton, 2017; Globerman, 2017; Stoian & Mohr, 2016; Villa, Rajwani & Lawton, 2015). The ability to leverage politics is becoming more important for the competitive advantage of EMNEs and firms are increasingly engaging in and formalizing political activities through lobbyism, political advocacy, CSR and other nonmarket strategies (Doh, Lawton, & Rajwani, 2012; White, Hemphill, Joplin, & Marsh, 2014).
At the level of international regimes, multiple international agreements, organizations, partnerships etc., such as the WTO, the TPP and the TTIP, have lost momentum and stagnated or even receded and in some domains new and contesting international regimes are being introduced, e.g. the AIIB, RCEP, BRICS and SCO, challenging those which were for a while hegemonic. At the level of civil society organizations and the general public, populist and anti-globalization movements have gained more strength and influence in a variety of countries and domains.
In addition to the distinct institutional levels, the special issue theme can be approached from different topical perspectives, for example:
Political risk perspective: Host country political risk has been widely analyzed in the literature. Home country political risk, on the other hand, has been less scrutinized. Companies may over time accumulate capabilities in managing political risks and hence may lower their overall exposure to them or mitigate them better. We encourage authors to address the issue of the political risk and respective political strategies of EMNEs in host countries, developed as well as developing.
Political capital perspective: While prior research has recognized the value of firms’ political capital in the home country and demonstrated that political connections provide firms with a favorable access to home country resources (Goldman, Rocholl, & So, 2013; Zhu & Chung, 2014), benefits (as well as liabilities) of political capital can also appear in host markets. We invite papers studying EMNEs’ internationalization through the lenses of political power balances and distribution, bargaining, and other basic features of political markets integrated in the IB context.
Non-market strategy / corporate political activity (CPA) perspective: The wide range of political strategies used by MNEs to influence host government decision-making is one of the cornerstones of the CPA concepts, and has raised a significant interest recently from international business and political economy scholars (Akbar & Kisilowski, 2015; Doh, Lawton, & Rajwani, 2012; Hillman, 2005). It is important to study further how the non-market mechanisms (e.g. CPA or lobbyism) affect the internationalization of EMNEs and OFDI from emerging economies.
Geopolitical perspective: EMNEs may occasionally serve as conduits for home country government influence over certain regions for socio-cultural or historical reasons and governments in emerging economies can leverage strategic partnerships in neighboring regions to strengthen their position in international political and economic relations (Maksakova, 2014). We seek papers addressing geopolitical issues of EMNE-host country relations such as the rise of economic nationalism (Zhang & He, 2014), the role of supranational institutions (Weinberg, 2016), and the involvement of politics in economic relations in general.
More generally, this special issue seeks contributions, which extend the understanding of the multi-level interplay between political processes, governance and policies and the internationalization of emerging market multinationals and the implications it holds for firms, governments and international regimes. This broader theme spans a wide range of specific topics and can be approached with different disciplinary, theoretical and empirical lenses. Hence, the editors welcome both theoretical and empirical papers, applying qualitative, quantitative or mixed methods, and encourage contributions from a range of disciplines, such as international business, strategy and organization, political science, political economy, economic geography, regional studies, economic sociology, as well as cross-disciplinary contributions. Papers aimed at advancing the theoretical frontier of the understanding of the significance of politics and policies for EMNEs and outward investment from emerging economies are particularly welcome.
Extending the understanding of the role of politics in the internationalization of EMNEs imposes few restrictions on the international business themes that may be addressed: most conventional IB themes may be subjected to a deeper and more explicit analysis of how they may be conditioned by politics. At the firm level, analysis may pertain to governance, strategies, and operations of firms alike. Firms’ more prevalent non-market strategies partly reflect, partly shape political processes and policy outcomes. At the level of governments, interventions in both domestic (e.g. factor and product) and international (e.g. trade and investment) markets impact on EMNE internationalization, and at the supranational level, trade and investment regulation and agreements is an important theme along with the dynamics with which these regimes evolve, partially under the influence of multinational firms and national governments.
Indicative but by no means exhaustive issues pertaining to the theme of the special issue include the following:
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