Edited by Mehmet Demirbag and Attilia Yaprak
Chapter 4: Breakout multinationals: emerging-market multinationals in global value chains
Two global business phenomena that have put a spotlight on firms from developing economies are the rise of emerging-market multinational enterprises (EMMNEs) and the integration of firms from developing countries into the global value chains (GVC) of many industries. Greater understanding about both issues carries significant implications for academia, management, and policy making. Academic inquiry into these phenomena has evolved independently of each other – with the rise of EMMNEs being investigated from the international business perspective and the integration of developing-country firms into GVC belonging more to development economics and sociology. However, the transformation of firms from developing countries from simply being local players to regional and even global ones blurs the line between the two streams of the literature and calls for a closer conversation that could allow one to draw more from the other’s insights (Pananond 2013a, b). In this chapter I propose that the rise of EMMNEs is partly driven by their pre-internationalization position in GVCs. I refer in particular to EMMNEs that have their early beginning as suppliers and exporters to globally integrated industries. Despite product and process upgrading initiatives taken during their domestic development, these firms nonetheless remain captive as low value-added members of the GVC. The majority of value remains captured by multinational lead firms from advanced economies that continue to exert power throughout the GVC. Hence, I propose that for domestic firms in emerging economies to become world class, they need to upgrade their capabilities by becoming multinationals.
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