Emerging Market Multinationals: a Decolonial Perspective

Emerging markets multinationals: the presence of the state and state owned enterprises

Abstract: In this article we argue that we should go beyond the dominant idea that the extension of traditional Euro-American theorizing is enough for a proper explanation of the internationalization of EMNC. The author of this article argues that we should take a decolonial turn instead, and direct our theorizing at the borders of the South. By embracing theories and knowledge that relate more specifically to the region, we can provide a better understanding of the internationalization of MNC not only from the North, but also from the South. Accordingly, we consider that history, geography and politics should be brought back into the theoretical debate from a specific locus of theorizing. A decolonial perspective from the South shows that a major issue involving the role of government and state companies, which are more obviously important in the South, but no less important in the North, remains largely overlooked or misrepresented.

Key words: decolonial perspective; emerging market multinationals; state owned enterprises

Introduction

Emerging markets multinationals (EMNC) were first studied by authors from the North in the early 1980s during the Cold War period when they were still called Third World multinationals (Wells, 1983; Lall, 1983). Decades marked by a sound belief that Multinational Corporations (MNC) are a solely Euro-American institution, have resulted in a great deal of mobilization of Euro-American theories, frameworks and concepts to explain the internationalization path of MNC from the so-called emerging economies (Dunning, Kim and Park, 2008; Johanson and Vahlne, 2009; Rugman, 2009), at the expense of other knowledges and proper understanding. This is at odds with the decay of Euro- American hegemony of knowledge demarcated by the crisis started in Wall Street in 2008, and the many claims put forward by management studies literature informed by postcolonial perspectives (Jack, Calás, Nkomo and Peltonen, 2008; Levy, 2008; Westwood and Jack, 2007).

In this article, and by definition, we consider EMNC as those corporations that are not from developed countries, that is, not from countries that are members of the Organization for Economic Co-operation and Development (OECD, 2012). In so doing, our intention is not to set EMNC aside as representing some kind of homogenous group, quite the contrary in fact. Actually, we understand that even within the group of countries which take part into OCDE, MNC are embedded into national or regional specificities.

We should go beyond the prevailing idea in the North that all that is needed is an ‘extension’ of traditional internationalization theories to explain the internationalization of EMNC (Buckley and Casson, 2009; Dunning et al, 2008; Johanson and Vahlne, 2009). The author of this article argues that we should take a decolonial turn instead, thus “shifting the geography of reasoning” (Mignolo, 2011: 136). The objective of this article is to investigate the traditional theorizing of EMNC within the field of international business studies (IBS) from the borders of the South and to embrace theories and knowledges from the region, theorizing other-wise and providing a better understanding of the trajectory of EMNC.

We need to break away from the idea that “in the three worlds of distribution of scientific labor, the First World had indeed the privilege of inventing the classification and being part of it” (Mignolo, 2011: 129). By doing this, we may realize that contemporary literature fails to address not only political actors and the specificities of countries and companies from the South, but mainly the (geo)politics of knowledge and theorizing (Mignolo, 2011). The decolonial perspective from the South, adopted in this article, shows that a major issue, namely the role of government and state companies, which are more obviously important in the South, but no less important in the North, remains largely overlooked or misrepresented.

Emerging markets multinationals: the presence of the state and state owned enterprises

Accordingly, from such position, we aim to bring history, geography and politics back into the debate from a specific locus of enunciation (or, more specifically, an-other locus of theorizing). We claim that an engagement with politics – an obviously important dimension of any process of internationalization, and one which has been ignored by dominant theorizing constrained by the geopolitics of knowledge (Mignolo, 2011) – may lead us, researchers and practitioners from both North and South, to a better understanding of the political role of both EMNC and MNC from developed countries (Guedes and Faria, 2010). The engagement with history and geography from such a perspective enables us to understand how MNC from the North engage with global transnational organizations (International Monetary Fund, World Trade Organization, World Bank; see Cooke, 2010, as an example on the latter), and how they interact with home and host countries and international non-governmental organizations (INGO; Guedes, 2010).

EMNC: traditional theorizing within IBS from a decolonial perspective

IBS is a subfield of strategic management studies formed at the intersection with the field of international business (IB; Peng and Zhou, 2006). It may also be found in the literature designated as Global Strategy, International Strategy Management and International Business Studies.

International business (IB) scholars have long pleaded for more interdisciplinary research to be carried out, and for the excessive emphasis on economics to be avoided. Dymsza (1984), after analyzing the academic literature for nine years from his position as editor-in-chief of JIBS, urged scholars to the need of interdisciplinary research. Apparently, his call was in vain given that twenty years later Meyer (2004) renewed the same call for more interdisciplinary studies, and mentioned the fact that economics had been the most influential approach in the previous two decades. Shenkar (2004) also supported the call for more interdisciplinary research and suggested the inclusion of an international relations perspective. Ironically, the plea for an interdisciplinary research combining an international relations perspective would not be met by scholars from the North, but from the South (see Faria, Ibarra-Colado and Guedes, 2010).

Alfred Chandler is considered the founder of the field of strategic management (Whittington, 2008). What he does in his seminal work – Strategy and Structure (Chandler, 1962), to date the most cited book in strategic management – is to define managerial capitalism as the motor of the American economy led by the big private company in which top managers formulate the strategic decisions. Later Chandler (1977) went even further, and stated that these managers effectively represented the “visible hand” that determines the best allocation of resources in order to optimize social interests. In terms of the role of the state, Chandler (1962) considered it beyond scope. Emphasis on the big private company and the power of the manager, while the state is considered irrelevant, has certainly had a big influence on IBS perspectives. Chandler’s work has been influenced by geo-political issues at the time (see Wanderley and Faria, 2012), and has certainly not only influenced IBS perspectives that have been developed in the North, but also constrained the development of perspectives from the South.

This process has undoubtedly corresponded to a particular moment in the history of the US, but should not necessarily be considered as a universal truth. Boddewyn (2004) considers that management is a historically and socially constructed concept that carries a strong American accent, hence particular consideration should be taken before considering it universal. Jack et al (2008) suggest that the literature dealing with IB and international management (IM), or management research that focuses on MNC, is strongly rooted in the positivist-functionalist tradition and that authors often fail to go through a reflexive process of their corresponding epistemological consequences. Furthermore, drawing upon a postcolonial perspective, they suggest that research carried out within the American context does not take into consideration its cultural and ideological content, because US knowledge has become ‘ideologically’ framed as universal within the dominant academic setting.

In the Cold War period, the field of strategic management studies embraced economics in order to build its academic legitimacy (Pettigrew, Thomas and Whittington, 2002); in tandem it 2

Emerging markets multinationals: the presence of the state and state owned enterprises debunked political and state-centered ideas for its association with communism in the US (Kelley, Cooke and Mills, 2006). Starting in early 1950s, “the export of ‘the American way of life’ and ideas about the role of education in development” (Parmar, 2002: 26) promoted by US institutions, represented a way to bar the growth of communism (Parmar, 2002), and to colonize the world with strategic discourse (Knights and Morgan, 1991). As a result, the field has not only overlooked politics, geography and history for more than 50 years, but also constrained academic dialogues across the North-South divide (Faria and Guedes, 2010). Consequently, government’s role and state companies, which are obviously important in the South, not least in the North, remains overlooked or misrepresented (e.g., Cuervo-Cazurra, 2008).

By the same token, it was during the Cold War period, within a context in which the US was imposing its commercial-military-political complex (Westwood and Jack, 2007), that traditional theories for the internationalization of MNC were first developed, and it was only during the 1970`s that the so-called Uppsala model (Johansonn and Vahlne, 1977), and the ‘OLI’ or eclectic paradigm (Dunning, 1980) were first conceived.

The Uppsala model is based on a series of cases involving the process of internationalization by Swedish companies, and more specifically, on four studies carried out by Swedish researchers on companies based in Sweden. Two of these studies had only been published in Swedish by the time the paper came out. This model suggests that companies internationalize along a learning curve in which they begin, necessarily, by generating direct exports, which is followed by the choosing of a local agent in the host country, and only later, after a lengthy learning process, are they able to opt for direct investment (Johansonn and Vahlne, 1977). It is worth noting that the paper states, in the case of the studies for the special steel and pulp and paper industries, the decision to set up a local company at the host country using agent’s structure was taken because “most of the establishments were occasioned by various kinds of economic crises in the agent firms” (Johansonn and Vahlne, 1977: 24). This may imply that, instead of having carefully decided for the best option after an incremental process, the Swedish exporter was in fact forced to buy out the local agent. In spite of this, and the small percentage of the international markets that Swedish companies represent, this model has been used as a reference for the internationalization process of companies across the world to this day. The ‘OLI’ or ‘eclectic’ paradigm (Dunning, 1980) aims at integrating a number of theories to create a framework for analyzing the entry mode into host countries during the internationalization process. It departs from the ‘I’, internalization theory (Buckley and Casson, 1976), by which companies carry out foreign investment directly, i.e. via internal processes, whenever this proves a cheaper alternative than using market instruments, and in so doing, can exploit their “O”, ‘ownership’ advantages, aiming at the best “L”, location (Dunning, 1980), which is clearly a model rooted in economics and rational decisions that neglect power and politics issues. The extant literature about MNC tends to neglect “the role of governments and the institutional context in home markets” (Gameltoft et al, 2010). Furthermore, when the state role is brought into picture it is made with the tendency to consider that the private is superior to the public (Faria and Guedes, 2007). Another tendency we may identify in traditional IBS literature is that the role of the state would jeopardize the proper functioning of the ‘free market’, and that it would generate advantages to EMNC (see Ghemawat and Khanna, 1998 as an example). Cuervo-Cazurra (2008) argues that relationship with governments gives EMNC the advantage of knowing how to bribe when operating in environments subject to corruption. Clearly, these are positions articulated from a perspective from the North, which, from a decolonial perspective, we might argue are imbued with prejudice towards a state presence in the international arena.

We argue that this has led to a reinforcement of epistemic coloniality established since colonial times (Mignolo, 2011), in which most of the studies about EMNC are made with a perspective from the North and depart from “traditional research, which is almost exclusively based on the experience of MNC from developed economies” (Peng and Parente, 2012: 362). This led Ramamurti (2009: 13) to conclude that IB fails to explain South-North FDI and that a good part of

Emerging markets multinationals: the presence of the state and state owned enterprises literature on the subject is composed of “context-free generalizations at high levels of abstraction, or context-dependent generalizations at much lower levels of abstraction”.

We suggest that when analyzing EMNC we cannot dissociate from state policy or even regional institutions (Wells, 2009). We agree with the fact that “competitive advantage has been fostered in different ways through government policies and institutions” (UNCTAD, 2006: 136), and that “there is a relatively high incidence of state involvement” (UNCTAD, 2006: 137), compared to traditional MNC. The importance of state companies and family controlled groups amongst EMNC becomes clear when we analyze the list of the 23 biggest non-financial companies in Latin America as proposed by Mortimore and Razo (2009): 8 are state or ex-state controlled; 9 are family controlled; and only 6 fall in the traditional category of large private companies.

Furthermore, UNCTAD (2011) offers a chapter on the importance of state owned enterprises (SOE). It states that, though they represent in number only 1% of world MNC in number of companies, they were responsible for 11% of total FDI in 2010: If that is not enough to state their importance, UNCTAD (2011) confirms that 19 out of the 100 world’s largest MNC are controlled by the state. As a matter of curiosity, General Motors/US became one of these 19 SOE after the US government’s bail-out. However, contrary to common perception, state companies are not a phenomenon of developing economies: 44% of their total number are located in developed economies, mainly Europe, and they also have a presence in the service sector, not only in the primary sector as generally believed (UNCTAD, 2011). “In 2010 there were at least 650 State-owned TNCs, with more than 8,500 foreign affiliates, operating around the globe” (UNCTAD, 2011: 28). In the same vein, state ownership in Brazil was highlighted in a report by a business magazine, which confirmed that the Brazilian federal government has some kind of participation, direct ownership or indirect via other federal bodies, in companies whose total value is over 70% of the total value of the listed companies in the Brazilian stock market, the BMF&Bovespa (Época, 2011). Hence, from a decolonial perspective from the borders of the South, we conclude that the state and state companies are more obviously important in the South, but no less important in the North, leading us to our second proposition. We clearly notice that the international capacity of EMNC is either downplayed and/or misrepresented. Sometimes it is represented by generalities such as “project execution and political and networking skills, among other non conventional ones” (Guillén and Garcia-Canal, 2009). To the other hand, we ought to add to the presence of ‘States’ in IBS another governmental agent that has made itself present in the international context in the recent years, the sovereign wealth funds (SWF). SWF have been responsible for the recycling of global imbalances and are leading traditional liberal countries to rethink their economic order. They influence the decision of multiple actors such as companies, states and institutions (Goldstein, 2009). According to UNCTAD (2012b) SWF held nearly USD 5 trillion in assets under management in 2011: “with their long-term and strategically oriented investment outlook, SWF appear well placed to invest in productive sectors in developing countries” (UNCTAD, 2012b: 14). Certainly, these constitute a powerhouse that should be, obviously, considered as state controlled and at least as important as the MNC in global governance. SWF are not an exclusivity of developing countries, since the biggest fund in the world is one controlled by the Norwegian government, and Canada too has a very large one under its control (Ramamurti, 2011). We argue that, to consider the role of the state and state companies (propositions 1 and 2 in this article) is a way to decolonize IBS and to bring back to the fore the power and political aspects of the international arena. An engagement with politics may lead us to a better understanding of the political role of both EMNC and MNC from developed countries. We should decolonize IBS literature from the North, in order to better understand the internationalization process of EMNC, whose drivers go beyond the mere economic aspects discussed by traditional theories.

Emerging markets multinationals: the presence of the state and state owned enterprises

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