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Why EMNEs Are Better for Host Countries than DMNEs Ravi Ramamurti Northeastern University, Boston March 31, 2009 U of Reading Conference, Reading, UK
In POOR Countries... EMNEs are Clearly Superior Unlike DMNEs, EMNE products are optimized for EM consumers Features: e.g. ruggedness, ease of O&M (weak infras.) Processes: less capital-intensive, more local inputs Prices that are highly affordable Affordability innovation led by EMNEs has brought technology to the masses in home and EM host countries BOP movement triggered by EMNEs, not DMNEs Huge welfare gains: reaching 10x-20x customers Like the difference between invention and commercialization.. E.g. Bharti Airtel in telecom services © Ravi Ramamurti
(Continued) More jobs, more local sourcing, more tech spillovers, less crowding out in host countries Especially in LDCs with weak institutions If you are a poor country, would you prefer? Tata Motors or General Motors? Bharti Airtel or Verizon and Vodafone? Huawei or Lucent and Nortel? Grameen Bank or Citibank and Bank of America? Haier or Maytag? Ranbaxy or Pfizer? © Ravi Ramamurti Advice to Next President, Nov 19, 08
For RICH countries, too, EMNEs contribute a lot Training DMNEs on how to succeed in EMs: IBM learns from Indian IT firms, Nokia from Ningbo, etc EMs will account for 60% or more of global GDP growth Strengthening competition, disturbing cozy oligopolies, benefiting consumers Speeding up and lowering NPD costs (production to R&D) Reviving mature industries (cement, steel, white goods, PCs) and Facilitating adjustment to globalization Helping to keep costs/inflation down by becoming low-cost supply partners of DMNEs (Hon Hai, Infosys, GVK Pharma, etc) Occasionally operating in global tech frontier and being global first- movers in new industries (Embraer, Suzlon, Huawei, etc) © Ravi Ramamurti
So, if you ask which type MNEDMNE or EMNE- typically does the greatest good for the greatest number in host and home countries, then EMNEs beat DMNEs hands down! © Ravi Ramamurti
EMNEs do have FSAs Affordability innovation thru local optimization and dramatic cost reduction is non-trivial capability Absorptive capacity Capital engineering skills Knowledge, customer intimacy Operational excellence, project management skills Late-mover advantages in mid-tech industries Global first-movers in some cases © Ravi Ramamurti Low-tech businesses: Local firms Mid-tech businesses: EMNEs High-tech businesses: Western MNEs
This presentation brought to you by… © Ravi Ramamurti Contributions by Yair Aharoni Alice Amsden Andrea Goldstein Don Lessard Alan Rugman Dan McCarthy Sheila Puffer Lou Wells Peter Williamson etc Cambridge U Press, 2009
Tatiana Kostova University of South Carolina Reading, UK, March 31, 2009 MNCs Contribution to Host Countries: Developed Country MNEs vs. Emerging Market.
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