How Home Country Weaknesses Can Constrain Further EMNE Growth: Extrapolating from the Example of India

Rajneesh Narula and Tiju Prasad Kodiyat
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Tiju Prasad Kodiyat: Henley Business School, University of Reading

John H Dunning Centre for International Business Discussion Papers from Henley Business School, University of Reading

Abstract: This paper discusses the opportunities and limitations that the location-specific (L) assets of the home country represent for MNEs, particularly at the early stages of internationalization. The systemic weaknesses of the home country can constrain the long-term competitiveness of its firms, and ultimately, the competitiveness of its MNEs. It is the contention of this paper that many of the emerging countries have a constrained set of L assets from which their firms are able to develop ownership-specific assets. Are their economies developing improved L assets that will promote a new generation of EMNEs? We examine data for the case of India, an economy regarded as having considerable potential to expand to knowledge-intensive sectors. At the macro level, India's performance is not different from countries of similar economic structure, and its current pockets of excellence are a reflection of its L assets. Our analysis suggests that the failure to foster and upgrade the L assets of emerging economies is likely to stunt the growth of their domestic firms, and ultimately any new MNE activity in the long-term.

Keywords: emerging economies; India; FDI; MNEs; knowledge infrastructure (search for similar items in EconPapers)
Date: 2014-02
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