Multinationals and Emerging Economies

Multinationals and Emerging Economies

The Quest for Innovation and Sustainability

Innovation, Co-operation and Development series

Edited by Wilfred Dolfsma, Geert Duysters and Ionara Costa

The global economy is changing rapidly and multinational corporations (MNCs) are at the forefront of this transformation. This book provides novel and profound analyses of how MNCs and emerging economies are related, and how this relationship affects the dynamics of the global economy. In particular, the authors deal with the nexus between multinationals, emerging economies and innovation from a variety of different perspectives. Innovation is regarded as a core driving force in the global economy but the authors show how it can impede as well as encourage sustainability. The book brings together insights from business studies and economics, and combines concise theoretical discussion with empirical analyses of unique data.

Chapter 10: Serving Low-Income Markets: Rethinking Multinational Corporations’ Strategies

Shuan SadreGhazi and Geert Duysters

Subjects: business and management, international business, organisational innovation, economics and finance, economics of innovation, international business, innovation and technology, economics of innovation, organisational innovation


Shuan SadreGhazi and Geert Duysters INTRODUCTION There is an ongoing debate in the academic literature about the role and impact of multinational corporations in developing countries. Some of the views are very sceptical and consider multinationals’ activities in developing countries as a new way of exploitation (Porritt, 2005:253), while others view multinational corporations as giant engines of economic growth that can become the new wellsprings of prosperity to developing economies (Hart, 2005; Prahalad, 2005). Alongside these discussions, we see an ongoing trend in which many multinationals try to build a positive image by engaging in philanthropic and corporate social responsibility projects. Recently, a new debate is emerging about market-based approaches to addressing low-income markets in developing countries and the main motivations that drive these approaches. These approaches are diverse and can range from poverty alleviation to pure profit driven attempts. Highlighting the characteristics of low-income markets, this chapter analyses challenges and opportunities that multinational corporations face in entering them. Higher-income markets have been the most attractive marketplace for large corporations, despite their smaller population in a global comparison to low-income markets. Consequently, a large share of the world population with low-income levels has been ignored as an attractive market by both multinationals and large domestic companies. It is not the size of the market that made them relatively unattractive. The general lack of purchasing power from these markets and infrastructure issues were commonly considered as major problems that made it very unattractive for companies to invest heavily in them....

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