A recent paper published in Technovation journal focuses on knowledge creation capability and motives for international investment by emerging-market multinational enterprises (EMNEs) innovating in emerging markets. Emerging markets (broadly understood) are becoming increasingly desirable locations for innovation, with Singapore, South Korea, China/Hong Hong, Israel, Estonia, Czechia and UAE rising in the Global Innovation Index measuring countries attractiveness and performance in innovation. The article analyses the motives for the relatively underresearched innovation-intensive investment by non-Chinese EMNEs in Central and Eastern Europe and offers new insights to the knowledge-based view of international innovation management. Building on interviews with senior managers from 11 EMNEs from India, Brazil, Russia, South Africa, Malaysia, and South Korea, this qualitative study develops, through a hybrid thematic analysis approach, a knowledge-based capability perspective on managing knowledge creation under different innovation-investment motives abroad, including knowledge seeking, market seeking, and dual motives. Knowledge creation capability includes knowledge integration, knowledge sharing, and knowledge cocreation. Both internal and external dimensions of knowledge creation capability are conceptualised, along with elements linking internal and external dimensions, namely managerial orchestration and innovation projects. The paper, co-authored by Featherlight's director Dr Zamborsky, contributes to the knowledge-based view of firm innovation and global strategy by stressing the roles of international innovation-investment motives and organisational capabilities for creating and managing knowledge in EMNEs. It offers implications for managing subsidiaries of multinational enterprises involved in innovation in emerging markets, particularly regarding enhancing and linking the internal and external dimensions of subsidiaries’ knowledge creation capability via ambidexterity. Read more at: https://doi.org/10.1016/j.technovation.2023.102829
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A new article published in California Management Review discusses how Chinese multinational enterprises internationalize in an era of increasingly fractured globalization. It introduces new perspectives that identify and describe four strategic pathways these multinationals employ while acquiring strategic assets and building and leveraging capabilities to increase value from their international presence. The pathways—bouncing up, down, sideways, and back—depend on the multinationals’ strategies and the evolution of their internationalization. The pathways are distinct yet intertwined and influenced by powerful non-market forces, including geopolitical tensions (U.S.-China rivalry in particular) and Chinese domestic regulatory intervention. These dynamics manifest themselves in globalization, de-globalization, and re-globalization shifts. The article was co-authored by Featherlight's director Dr Zamborsky. You can read it at: https://doi.org/10.1177/00081256231193
Infosys, India's giant IT outsourcing and consulting firm, announced the openning of a 2,000-employee technology centre in Indiana, U.S., with another 8,000 jobs in the U.S. planned in coming years. Additional three hubs focused on technology and innovation will be opened in the U.S. soon. While the 10,000 new jobs in the U.S. are rather small compared to the global pool of over 200,000 Infosys staff, the decision constitutes a major shift in Infosys's strategy. The move was partly influenced by the political environment in the U.S. (President Trump's threats to limit H1-B skilled work visas under which a lot of Indian Infosys workers came into the country). However, even more important reasons were probably the need to move up the value chain to more innovative consulting services, access top talent, and be close to customers. The local presence helps with building trust.
Global competitiveness requires some hard choices. Ford has pulled out of two large Asian markets because of strong local competition. In Japan, imported car brands account for only about 6% of sales and the room for a profitable growth in a country with an ageing population and young urban customers shunning cars was limited. In Indonesia, the government requires local assembly and Ford was nowhere close to an efficient scale, selling only about 6,000 cars and trucks last year. The lesson: don't go global recklessly.
From 2007 to 2009, Danone, a French multinational food company, was in a fierce battle with Chinese Wahaha Group (the largest beverage producer in China) to win control of their joint ventures in China. Danone discovered financial irregularities in its Chinese joint ventures, and the legal battle that ensued involved disputes about brands and perceived levels of commitment to the JVs. Lawsuits were launched both in China and internationally. Finally, Danone of France resolved a long-running dispute with its Chinese joint venture partner in late 2009, agreeing to exit the venture by selling its 51 percent stake in the Wahaha.
Procter & Gamble (P&G), a producer of fast moving consumer goods such as Head and Shoulders shampoo, in 2000 launched the Connect and Develop programme with the goal of generating more than half of the company’s innovations from outside sources. The programme sped up the process of innovation, resulting in an almost 60% increase in innovation productivity. Their innovation success rate more than doubled, while the cost of innovation fell. More than 35% of their new products in the market had elements originating from outside P&G in 2005, up from around 15% in 2000.
Canadian Research in Motion (RIM), the producer of Blackberry smartphones, can trace its decline from its leading position in the smartphone market to slow internationalisation of its R&D and innovation, leaving it “stuck” with a rather limited pool of talent in its home country. In 2008, shortly after the launch of Apple’s iPhone, the vast majority of RIM’s 2,000 R&D staff remained based in Canada and the company has not opted for an aggressive expansion of its innovation activities in other locations such as the United States.
It is unusual for MNEs to be so transnational that they move their HQ overseas, but some of them do. HSBC (Hong Kong), SABMiller (South Africa), Anglo American (South Africa), and Old Mutual (South Africa) have all moved their headquarters to London and Chinese Lenovo moved its HQ to Raleigh, North Carolina in the United States. However, some companies are reassessing their choice. HSBC has hinted several times that it might relocate its headquarters from London to Hong Kong.
IKEA, a Swedish retail giant with operations around the world, learned about the importance of institutions and ethics when it expanded in Russia, a country with vastly different “rules of the game” compared to Sweden. While bribes are almost unheard of in Sweden, they are commonplace in Russia. When the expansion of IKEA in Russia was held up by bureaucracy and a bribe-seeking electricity company, one of its Russian executives apparently sped up the process in the “Russian way” by paying the utility firm officials “an extra”. When this came to the public’s attention in Sweden, two IKEA officials were fired as result.
The largest investment scam in world history originated in the United States. Bernie Madoff , a New York self-styled financier, ran what he pretended to be a sophisticated hedge fund, attracting personal investment from wealthy Americans while promising them over 20% returns. His investors included celebrities such as movie director Steven Spielberg, actress Uma Thurman and TV personality Larry King. In the end, Madoff lost over $10 billion after the fund was found to be a Ponzi scheme, in which returns and payments to old investors are paid for by incoming funds from new investors. The collapse of the investment scheme compounded the effects of the demise of the Lehman Brothers investment bank and exacerbated the Global Financial Crisis of 2008-2009. This had negative effects worldwide, as investors almost lost faith in the “institutions” and “ethics” underpinning the global capitalist system.
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October 2023
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