Risks and rewards in the globalization of telecommunications in emerging economies

Ravi Ramamurti

Journal of World Business, 2000, vol. 35, issue 2, 149-170

Abstract: The telecommunications industry in emerging markets has been transformed from a collection of mostly state-owned, national companies to one with many privately owned, multinational corporations (MNCs). Using examples from Latin America, this dramatic reconfiguration is explained as resulting from the dynamic interplay between country and firm strategies. It is further argued that first-mover MNCs reaped greater profits than late-mover MNCs, whereas timing had the opposite consequence for host countries. First-mover MNCs had the advantage of buying the incumbent state enterprise, enjoying monopoly privileges, making preemptive investments, leveraging political connections, and adopting entry-deterring policies to minimize competition. But early-reforming countries had to contend with the region's lack of credibility with investors by deeply discounting sale price, offering special privileges and protections, and absorbing risks that late-reforming countries were able to pass on to MNCs. The paper concludes that telecommunications no longer offers foreign investors easy riches like those enjoyed by first-moving MNCs in first-reforming countries. Late-moving firms, especially in late-reforming countries, are exposed not only to governments with higher bargaining power but also to greater regulatory and competitive risks.

Date: 2000
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