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Until recently, when the question ‘what are the competitive advantages of multinationals from emerging economies in the global market?’ was posed to either academics or Western executives it typically elicited a simple response: ‘None’. To the extent that these firms from emerging economies were winning market share abroad, this was explained by the fortuitous access to so called ‘country-specific advantages’ (CSAs) such as a pool of low-cost labour in their home base (Rugman and Verbeke, 2001). Their success was viewed as a legacy of their birth. They were generally thought to lack ownership of the rich stocks of proprietary, intangible assets that theory argued was required for multinationals to be an efficient organisational form (Caves, 1986). Dunning (2001) termed the benefits of these intangible assets ‘ownership advantages’ – a term chosen to emphasise the idea that the transaction costs involved in transferring these assets (and hence their associated advantages) across borders using market mechanisms are higher than the costs of transferring them internally within an organisation under the same ownership. Without these intangible assets there was no reason why their products and resources should not be exchanged internationally through trade in an open market. According to a strict interpretation of this theory, therefore, the existence of emerging market multinational enterprises (EMNEs) must simply be the result of market distortions such as trade barriers or government support.
The discussion of value-chain configuration (VCC) touches the essence of the phenomenon of multinational companies. A company only becomes multinational because the location of its operations in different countries gives it competitive advantages. At the same time, in order to settle in a foreign country the company has to rely on distinctive competitive advantages relative to both local and international competitors. The international value-chain configuration (IVCC) provides a depiction of the strategy of a multinational company, its achievements, the forces to which it is subject and perhaps also signals its future intentions.
The aim of this chapter is to show how the Brazilian multinationals are configuring their international value chains and how they are managing them to compete in international markets. For that, the primary information is the spatial dispersion of activities: what activities are they doing and where. A second level of information relates to why: what are the reasons that justify the adoption of the configurations observed. The third level relates to how: what strengths are mobilised to move into the international locations? Finally, it is important to assess how the Brazilian multinational companies are managing their international value chains to gain competitiveness.
Brazil is not considered a good performer when it comes to innovation. The observation is not wrong but it is also not correct. Brazil is not well ranked in specialised lists which evaluate the performance of the country as a whole according to the traditional indicators: investment in research and development (R&D) and number of patents. However, Brazilian firms are internationalising successfully and innovations play an important role in their strategies.
The approach to innovation adopted by Brazilian companies takes on a perspective different from the traditional scientific research leading to technological break-through, so much appreciated in developed countries. In this chapter, we will show that other approaches to innovation are being developed by Brazilian multinationals in order to gain competitive advantage.
We will show that these approaches are the result of a series of factors and circumstances involving: the evolution of the country’s social and political environment that affected organisational culture and entrepreneurship; the obliviousness of the national innovation system; the unfolding of economic development policies that prescribed areas where local companies could grow in the face of competition from the subsidiaries of foreign multinationals; and, finally, the competences and resources which supported the strategies of Brazilian multinationals to compete in the international markets.
The aim of this book has been to better understand the extent, nature and roots of the competitive advantage of emerging market multinational enterprises (EMNEs) and, in particular, the ways in which their internationalisation is contributing to the enhancement of that competitive advantage. To do so we examined three, inter-related factors that might potentially help EMNEs build competitive advantage: innovation, value-chain configuration and cross-border mergers and acquisitions (M&A); we compared and contrasted the experience of firms from each of the BRIC countries (Brazil, Russia, India and China). We now step back to draw some conclusions from this analysis.
We begin with some general observations about the way innovation, value-chain configuration and cross-border M&A appear to interact to create competitive advantage for EMNEs. Our aim is to provide a framework that will help to bring together the various strands of our analysis and provide an appropriate context for the interpretation of our findings. With this integrated framework in mind, we offer generalisations about the competitive advantages of EMNEs observed from the evidence in the earlier chapters. In doing so, we show how some of the puzzles that the behaviour of EMNEs has posed for international business theorists might be resolved. We also discuss whether findings from our BRIC sample might apply to the next rung of emerging economies. Finally, we look at the implications for managers of the appearance of EMNEs as global competitors (both for managers within incumbent competitors and the EMNEs themselves) and for policy makers in governments.