by Matthias Wenzel, Leuphana University of Lüneburg, Germany
History shows us that many multinational enterprises originate in Western industrial economies. Yet, these enterprises are not alone anymore. Huawei, TikTok, and WeChat are just a few examples of “emerging market multinational enterprises” (EMNEs), ones that are based in emerging market economies.
In a recent SMS Collection, Torben Pedersen and Steve Tallman ask, “Will EMNEs dominate the world economy in the near future?” As the authors argue: “Likely not, as multinationals from advanced countries fight back… but they will be serious competitors and we must understand them, not dismiss them.” And yet, Pedersen and Tallman highlight that EMNEs should be taken seriously as potentially powerful competitors, among others, for the following reasons.
Different Ways of Competing
In Western economies, managers often believe that the main, if not the most important way to survive competition is to innovate. In doing so, they tend to underestimate EMNE due to their apparent lack of “true innovation”. Yet, as Pedersen and Tallman highlight, EMNEs may attempt to compete in ways that are incompatible with approaches pursued in Western economies—and are nevertheless successful at least in part. This exhorts managers to engage with different ways of competing, even those that they may be unfamiliar with.
Competing with Different Firm-specific Resources
Do EMNEs compete without firm-specific resources such as specialized skills and protected technology? Not quite, Pedersen and Tallman argue. A view on EMNEs from a Western market perspective might insinuate that the emerging market context offers few, if any endowments of firm-specific resources to EMNEs. However, the resources based on which EMNEs compete are typically firm-specific, but they may pass unnoticed from a Western market perspective because they differ from the ones that MNEs in Western economies may leverage, and they are often interrelated with the political and cultural contexts in ways that outsiders rarely understand. This calls on managers to take a closer, fresh look at EMNEs as potentially strong competitors in globalized markets.
On the Authors of the SMS Collection
Torben Pedersen is Professor in the Department of Management and Technology at Bocconi University.
Steve Tallman is Professor of Management and holds the E. Claiborne Robins Distinguished Professorship in Business at the Robins School of Business, University of Richmond.
The SMS Collection on “emerging market multinational enterprises” can be accessed here.