How weaknesses in home country location advantages can constrain EMNE growth: The example of India

Abstract

Purpose

This paper aims to discuss the opportunities and limitations that the location-specific advantages of the home country represent for infant multinational enterprises (MNEs). The systemic weaknesses of the home country can constrain the long-term competitiveness of its firms and, ultimately, the competitiveness of its MNEs. Many emerging countries have a constrained set of location-specific (L) assets from which their firms are able to develop ownership-specific assets.

Design/methodology/approach

The authors examine data for the case of India, an economy regarded as having considerable potential to expand to knowledge-intensive sectors, using a “systems of innovation” framework, merged with an analysis of L advantages.

Findings

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. The 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.

Research limitations/implications

In the case of India, systemic policy changes are needed to upgrade the knowledge infrastructure and institutions to support a shift in the competitive advantages to new sectors outside existing pockets of excellence. Indian firms are unlikely to be able to rely on the knowledge infrastructure of their home economy and will “exit” the Indian milieu because of weaknesses in L assets, as much as to seek markets and customers elsewhere. There will be few opportunities for new generations of firms to venture abroad from a position of strength, rather than as a means to overcome their home country disadvantages.

Originality/value

The evidence would suggest that – like other emerging economies – Indian firms are unlikely to be able to rely on the knowledge infrastructure of their home economy and are “exiting” the Indian milieu because of its weaknesses in L assets, as much as to seek markets and customers elsewhere. Most importantly, India faces a potential shortage of skilled human capital in the medium term.

Citation

Narula, R. and Kodiyat, T.P. (2016), "How weaknesses in home country location advantages can constrain EMNE growth: The example of India", Multinational Business Review, Vol. 24 No. 3, pp. 249-278. https://doi.org/10.1108/MBR-07-2016-0026