Academic journal article The European Journal of Comparative Economics

Outward Foreign Direct Investment from BRIC Countries: Comparing Strategies of Brazilian, Russian, Indian and Chinese Multinational Companies

Academic journal article The European Journal of Comparative Economics

Outward Foreign Direct Investment from BRIC Countries: Comparing Strategies of Brazilian, Russian, Indian and Chinese Multinational Companies

Article excerpt

Outward foreign direct investment (OFDI) from post-communist and fast-growing developing (emerging) countries started to increasingly draw attention in the early 2000s (2). Since then, analysing foreign investment strategies of multinational companies (MNCs) whose parent headquarters are based in each BRIC country has actually become a fashioned avenue for research. The literature based on country case studies has been growing at a skyrocketing pace during the past decade, though overall comparative studies are still in the cradle; practically no one comparison samples all the four countries together (3). Using a same methodology for comparing Brazilian and Indian MNCs (Andreff, 2014) then Russian and Chinese MNCs (Andreff, 2015) has facilitated an overall and systematic comparison of OFDI from all four BRICs presented below. Such comparison is of interest since Russia and China are transition countries while, at about the same time, India and Brazil have liberalised their economies without a post-communist systemic change.

Any deep comparison between the four BRICs' economies will find out so many disparities, sometimes more than similarities that the country grouping coined BRIC may appear heterogeneous enough to contest that gathering the four countries together is relevant. In the same vein, the present paper unveils a number of significant differences between OFDI strategies conducted by MNCs from different BRICs, beyond some marked similarities. A sensible expectation would be to consider that Russian and Chinese MNCs, since they are based in two post-communist economies in transition toward some kind of state capitalism, should be closer in terms of OFDI strategies while Brazilian and Indian MNCs operating from freer market economies should have together more similar features and strategies that would differentiate them from their Russian and Chinese competitors. The outcome of the comparison led in this article does not entirely confirm such expectation: BRICs' MNCs similarities and differences do not draw a clear-cut dividing line between transitional MNCs and emerging MNCs that emanate from more liberalized, though not fully-fledged, market economies like Brazil and India.

OFDI is compared across the BRICs first in terms of historical emergence (Section 1), then as regard how it has boomed in the early 2000s and is muddling through the current financial crisis (Section 2). Specificities of their MNCs' strategies are pointed out (Section 3), including their geographical (Section 4) and industrial distribution (Section 5), as well as the respective determinants of their OFDI as they show up from surveying a sample of econometric tests (Section 6). Finally, the role of home-country government vis-a-vis home-based MNCs is differentiated (Section 7). Conclusion grasps some main comparative results (Section 8).

1. The emergence of multinational companies based in BRICs

Indian and Brazilian firms are known to have started up investing abroad earlier than Chinese and Russian MNCs. According to Lall (1983), the first OFDI from India occurred as early as 1962 with Jay Engineering Works setting an assembly line for sewing machines in Sri Lanka. Actually, the first one was the establishment of a textile mill in Ethiopia by Birla in 1955 (Saikia, 2012). Indian firms begun to significantly invest abroad in the 1960s, but India's restrictive OFDI regime limited them to small joint ventures (JVs) in developing countries such as Kenya, Uganda, Nigeria, Malaysia Thailand and Sri Lanka. Liberalisation of OFDI policy pushed up Indian firms to invest abroad though under stringent conditions fixed by the state. A major objective of the new policy was to developing JVs rather than fully-owned subsidiaries. Indian OFDI was felt--by the government--as a tool for export promotion in the equipment goods industry. This drove market seeking OFDI primarily to neighbouring host countries, but also in the Middle-East and a few African countries, with a focus on countries having a significant number of people with Indian origins as local residents. …

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