Do we need different frameworks to explain infant MNEs from developing countries?

Rajneesh Narula


Applying extant IB theory, I argue that initial firm internationalisation is shaped by the interdependence and dynamic interaction between its O assets and the L assets of its home location. Regardless of nationality, the initial O assets of an infant MNE tend to be constrained by the L assets available to them, rather than by their strategy. I also contrast the modus operandi of developing country (DC) infant MNEs with those from advanced economies, highlighting the similarities and differences. The O assets of DC MNEs are largely determined by home country influences. Advanced economy MNEs have a larger set of L assets to draw from, because a wider variety of non-home country influences exist. Strategy and host countries begin to play a greater role once MNEs have moved past the nascent stage. I also take a look at the changes due to globalization and how it has affected the propensity of firms to internationalise. I argue that successful firms (regardless of nationality) will increasingly explore internationalisation, but the basic pre-condition - that of possessing competitive O assets - remains the same. There is also no reason to believe that this is likely to happen disproportionately from the developing countries.

Key words: FDI, MNEs, eclectic paradigm, developing countries, emerging economies markets.

JEL codes: F23, L52, O14, O19