Emerging Market Multinationals

In Focus of Research at TIM/TUHH

[ Rajnish Tiwari ]

The ongoing shift from "internationalization" to "globalization" has created many multinationals in economically emerging countries in the developing "South". Many domestic firms in the "emerging markets" like the BRIC countries (Brazil, Russia, China and India) have started venturing abroad seeking expansion opportunities, market access and technological know-how. In many instances these companies have been able to earn above-average profits due to sustained high economic growth in the domestic market. On the other hand they are feeling to face competitive pressure from global multinationals that are seeking to establish their presence in the emerging markets making use of economic liberalization in those countries where foregin direct investments (FDI) were restricted in the past.

The outward FDI from emerging markets has in the meantime reached significant levels. For instance, India’s outward FDI stock has increased nearly 38-fold in last 10 years, growing from $ 2.6 billion at the end of March 2001 to $ 98.2 billion at the end of March 2011, according to official Reserve Bank of India (RBI) data. Emerging market multinationals, however, generally differ in their choices of FDI destinations and entry mode, which are in turn dependent on the underlying investment motives. For example, state-run Chinese firms have generally focused on securing access to natural resources in Africa and Latin America, whereas mostly private-sector Indian firms have gone on an acquisition spree in industrialized nations in the West. Some of the most prominent examples of Indian outward FDI are the acquisition of Jaguar and Land Rover by Tata Motors, of Corus Steel by Tata Steel, and closer home in Germany of windmill manufacturer REpower Systems by Suzlon Energy.

As one of our main research areas under the Research Project Global Innovation we pay special attention to this emerging phenomenon and continously seek to examine:

• The extent, motivation and challenges for outward FDI from emerging economies.

• Their impact on labour markets and on national innovation systems of the host country .

• Patterns of their activities, functional distribution of tasks, especially those related to research and development (R&D) and innovations;

• Implications for the paradigm of "global innovation" and "open innovations"

• Cross-cultural issues and conflict resolving mechanism in inter-cultural teams and post-acquisition integration.

We continuously follow overseas investments by Indian firms especially those with relevance to Germany. Additionally, we have initiated a series called "The Emergence of Indian Multinationals" and already conducted two empirical survey of Indian firms in Germany, which to our knowledge are the only of its kind worldwide as far as first-hand survey of overseas operations of Indian firms are concerned:

• The Emergence of Indian Multinationals An Analysis of the Critical Success Factors
  
  
• The Emergence of Indian Multinationals: An Empirical Study of Motives, Status-quo and Trends of Indian Investments in Germany
  

This research series of ours has generated considerable interest by the media and the practitioners alike. In the following we provide a few links to reports that have quoted our work:

• mergermarket (Financial Times Group, UK, 24.05.2011): India, Germany may witness more deals over next two years - analysis
  
  
• German News (German Embassy's magazine in Delhi, Dec. 2010, p. 32-33): Rupees for Eastern Germany
  
  
• KPMG (Sept. 2010): India & Germany: Exciting Present, Promising Future
  
  
• Frankfurter Allgemeine Zeitung (FAZ, 26.11.2010): Indische Investitionen: Rupien für Ostdeutschland
  
  
• Manager Magazin (Ausgabe 08/2010, S. 80-85): Trends - Indien: DAS INDER-NET
  
  
• Financial Express (India, Dec. 2009, Special Report on Indo-German relations): Germany: Alive with Possibilities

Some of our publications with a direct relevance to this theme are listed below. Further publications are in the pipeline.

• Tiwari, R. and Herstatt, C. (2010): Indian Firms in Germany: Recent FDI trends & Critical Success Factors, in: Annual Review 2010, Indo-German Chamber of Commerce, Mumbai (India).
• Tiwari, R. and Herstatt, C. (2010): "The Emergence of Indian Multinational Enterprises: An Empirical Study of the Motives, Current Status, and Trends of Indian Investment in Germany", in: K. P. Sauvant, J. P. Pradhan, A. Chatterjee and B. Harley (eds.): The Rise of Indian Multinationals: Perspectives on Indian Outward Foreign Direct Investment, New York: Palgrave Macmillan.
• Tiwari, R. and Herstatt, C. (2010): Excellent target: Indian investment in Germany - recent developments and success factors, in: GermanyContact India, June 2010, p. 18-19.
• Tiwari, R. (2010): Indische Unternehmen in Deutschland: Motive, Erfahrungen und Herausforderungen, in: E. G. Fritz (Hrsg.): Entwicklungsland, Schwellenland, Global Player: Indiens Weg in die Verantwortung, S. 167-177, Oberhausen: ATHENA-Verlag.
• Tiwari, R. (2009): Indian Investments in Germany: Motives, Status-quo and Trends, in: Annual Review 2009, Indo-German Chamber of Commerce, Mumbai (India).
• Tiwari, R. and Herstatt, C. (2009): The Emergence of Indian Multinationals: An Empricial Study of Motives, Status-quo and Trends of Indian Investments in Germany, Working Paper No. 56, Institute of Technology and Innovation Management, Hamburg University of Technology.