DO HOME COUNTRY EFFECTS ENCOURAGE EMERGING MARKET MNEs TO ENGAGE IN STRATEGIC ASSET SEEKING?
AN EMPIRICAL STUDY OF MALAYSIAN MNEs

Abstract

Outward foreign direct investment-related to strategic asset seeking (henceforth; SAS OFDI) has garnered International business scholars' attention. Many studies have emphasized that firms from emerging markets are capturing assets from developed market firms to upgrade and build their capacity for being competitive at their home market (Lecraw, 1993; Makino et al., 2002; Child and Rodrigues, 2005; (Cuervo-Cazurra et al., 2018; Kong et al., 2020)). EMNEs - as ‘late-comers’ aspiring to ‘catch-up’- have been actively involved in SAS FDI in developed markets (Boisot & Meyer, 2008; Child & Rodrigues, 2005; Luo & Tung, 2007). They aim to rapidly fill their capability holes (Ramamurti & Williamson, 2019). This asset augmentation arises because EMNEs are ‘pushed’ to achieve the competitive advantages they lack to compete with foreign entrants in their home country (Chari, 2013) and local firms in host countries (Buckley et al., 2016).
Home country effects has garnered attention among international business scholars (Cuervo- Cazurra et al., 2018; Wan & Hoskisson, 2003; Yan et al., 2018). Although the internationalization of emerging market market firm is becoming increasingly important, the role of home country effects in international expansion is poorly understood (Cuervo-Cazurra and Dau, 2009;Cui and Jiang, 2010;Del Sol and Kogan, 2007;Luo and Tung, 2007;Witt and Lewin, 2007; Cuervo-Cazurra,2019). Indeed, there is considerable debate about how home country effects influence outward internationalization strategies (Dau, 2012,Del Sol and Kogan, 2007,Lee and Weng, 2013,Liu et al., 2014,Luo and Wang, 2012). There are two home country instiutions namely instuitional constraint and support (Li & Ding,2017). The impacts of the home country instuitions we called as home country effects (Cuervo-Cazurra,2008). It
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is classified as business groups and domestic governmental support, and have been speculated to play an important impact on emerging market MNE internationalisation However, little research has specifically examined empirically whether and how these so called ‘home country effects’ assists the SAS OFDI of EMNEs. This research looks specifically at EMNEs from Malaysia and what assets Malaysian EMNEs try and acquire from developed counterparts. It aims to explore in more detail the role of home country effects in assisting strategic assets seeking; from EMNEs perspectives. Malaysia launched a National Development Policy as early as 1991, with the purpose of assisting firms in exploiting technological resource from overseas, making it an interesting case.
This research adopted an explanatory sequential approach, where phase one data was collected and it I focused on quantitative empirical models to better understand the general characteristics of Malaysian MNE outward FDI strategy (using Tobit Regression models). In the second phase of the research qualitative multiple case studies were employed to delve further into the characteristics of Malaysian MNEs and explore their considerable heterogeneity. Specifically, in Malaysia business groups dominate and many of them are dominated by either ethnic groups (Chinese mainly) and state-owned groups. In the former group, firms were normally owned by a single family, a group of families or a Chinese political party. By contrast, state owned groups evidently expanded through government involvement and support and are controlled by ethnic Malays. This has created an interesting duality in Malaysian business and also its outward FDI characteristics, providing interesting insights into the impacts of domestic home country effects (i.e. including the historical legacy of the impacts of different ethnic groupings). Indeed, although there are government and military enterprises in other Southeast Asian countries such as in the Philippines and Indonesia, it is only in Malaysia that political parties actually own or control large business groups. Three large Malaysian MNEs with varying histories and background (Petronas, Sime Darby and YTL)
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were chosen to further explore the nature of Malaysian MNEs and in particular consider in greater detail that nature of their strategic asset seeking activities.
I make, in particular, several contributions to the theoretical "goldilocks debate," which scholars have raised concerning the validation of current theories explaining EMNE’ activities. Thisresearchhasdemonstratedtheroleofhomecountryeffectsinassistingstrategic asset seeking. Moreover, this research's uniqueness relates to providing further insights into the ethnic origins and heterogeneity of Malaysian MNEs and how this influences their behaviors, including seeking assets from Western counterparts. To date, much of the IB literature has centralized on countries from BRICS. Therefore, this could able to add knowledge to EMNEs' works of literature. In a nutshell, this research will enhance our understanding of EMNEs internationalization, specifically from Malaysia. This research also will contribute new knowledge to business groups' literature.