1) Differences between EMNEs and developed (300-400 words)
It is evident that EMNEs has distinct differences in advantages as compared to traditional MNEs. The rapidly growing and substantial local markets has offered them platform and cash to expand internationally. However, EMNEs face several disadvantages as compared to DMNEs due to weak institutional environment and market constraints in their home countries (Ramamurti and Singh, 2009). This led to EMNEs facing lack of technological-based ownership advantages and managerial capabilities (Ramamurti and Singh, 2009).
Albeit the assertion that developed multinationals hold better ownership advantages such as technological advancement, EMNEs shows higher degree of trans-nationality by means of larger shares of incomings and employees abroad. Ramamurti and Singh (2009) study shows that many EMNEs from Brazil and South Africa boasted significant cash flows due to high prices offered for their countries’ raw minerals hence they were able enjoy ready access to these resources due to their home country’s advantages. Awuah and Anderson (2013) state that EMNEs are theoretically different in respect of comparative advantage because of their latecomer standing. As a result, EMNEs are seen to utilize international expansion as a springboard to acquire strategic resources to compete with existing rivals and overcoming their latecomer status (Ramamurti, 2012). Hence, EMNEs typically ply on fast pace of internationalization, which involve aggressive and risk-taking acquisition to facilitate swift transfer of strategic assets with the aim to remain internationally competitive (Awuah and Anderson, 2013). Matthews (2006) further suggests that through these acquisitions, EMNEs were able to acquire accumulated capabilities over time such as economies of scale.
2) Emerging multinationals and OLI Framework (200-400 words)
In the light of the recent aggressive internationalization of EMNEs, the OLI framework has unfortunately faced several criticisms on whether these conditions remain of theoretical applicability to explain EMNEs’ investment decisions and process (Matthews, 2006).
Fundamentally, EMNEs do not have the same competitive advantages as compared to traditional MNES hence, Matthews (2002) indicated that EMNEs lacks ownership advantages and thus they are internationalizing in order to achieve these advantages. Goldstein & Pusterla (2010) additionally points out that China EMNEs relied heavily on locational advantages such as minerals in Brazil and not on the basis of the ‘O’ in the framework. This led to the notion that EMNEs face the absence of ownership advantages that constitute the main rationale of traditional MNEs (Matthews, 2006). This is because EMNEs engage in asset exploration by home augmentation instead of home exploitation in order to obtain access to strategic or unique resources so as to overcome initial resource impediments (Eden and Dai, 2010). This indisputably contradicts the OLI framework, which requires firms to possess pertinent ownership advantages that overweigh the cost of competing abroad (Tsui, 2007).
Despite the criticism, Dunning (2006) accepted that EMNEs face a shortfall in ownership advantages but suggested that ownership advantages on the other hand can be stemmed through the nationality of these EMNEs’ firm whereby country-specific factors can be reinforced into their ownership advantages. Additionally, the framework is criticized as static as it only takes into consideration pre-existent advantages and does not elaborate on the accumulated advantages and experience garnered from international market involvement (Moon and Rohel, 2001). It is concurred that OLI framework is not suitable to clarify firm activities at micro-level (Matthews, 2006). However, the framework is still useful as a first point of orientation for emerging market multinationals, as it is adequately robust in elucidating the structure of economic system at macro-level (He and Wong, 2004).