Edited by Lena Zander
Making a Difference
Edited by Lena Zander
An Ecosystem and a Sharing Philosophy
Klaus E. Meyer and Hung Vo Nguyen
Foreign investors entering emerging markets have to take strategic decisions on where and how to set up operations. These decisions have to accommodate institutional conditions that vary not only between countries, but also within the host economy. We offer a theoretical framework to analyse how institutions in an emerging economy influence entry strategy decisions. On this basis, we analyse the determinants of two key aspects of entry strategy: location and entry mode in Vietnam. We find that sub-national institutional variables have a significant influence on both dimensions. The availability of scarce resources affects the location of FDI and the likelihood of Greenfield entry. Institutional pressures arising from incumbent state-owned firms and the domestic market orientation of the investor lead to a preference for joint venture entry.
Klaus E. Meyer
The process of change from a centrally planned system to a market economy generates an institutional framework that is only partially reformed, and therefore inconsistent and unstable. This leads to high transaction costs for economic agents. Multinational enterprises entering transition countries have to adapt their strategies to the local institutions and reduce exposure to highly imperfect markets. This paper analyzes how the costs of organizing business in transition environments influence entry mode choice. The empirical results show that host country institutions in transition economies, have an impact on the choice of entry modes. Moreover, different mechanisms determine the internalization of managerial and technological knowledge.
Klaus E. Meyer and Yen Thi Thu Tran
Multinational enterprises (MNEs) are expanding their global reach, carrying their products and brands to new and diverse markets in emerging economies. As they tailor their strategies to the local context, they have to create product and brand portfolios that match their competences with local needs. A multi-tier strategy with local and/or global brands may provide MNEs with the widest reach into the market and the potential for market leadership. However, it has to be supported with an appropriate combination of global and local resources. Foreign entrants therefore have to develop operational capabilities for the specific context, which requires complementary resources that are typically controlled by local firms. As institutional obstacles and weaknesses of local firms often inhibit the direct acquisitions, foreign investors may pursue unconventional strategies to acquire local resources. We outline the strategies for penetrating local markets through multi-tier branding and the acquisition of local firms, and offer new typologies that describe staged, multiple, indirect, or brownfield acquisitions. We illustrate them by analysing the entry and growth of Carlsberg Breweries in four very different emerging economies: Poland, Lithuania, Vietnam and China.