A Critical Analysis of Springboard Theory via an International Comparative Analysis of the Strategic Asset Seeking Foreign Direct Investments of Emerging and Developed Market MNEs

Abstract

The aim of this thesis was to revisit the current International Business theories of emerging market MNEs (EMNEs), with the primary focus on 'Springboard Theory' (Luo & Tung, 2018) which contrasts EMNEs with developed market MNEs (DMNEs). Few empirical studies have systematically compared EMNEs with DMNEs, although the FDI strategies of EMNEs in asset-seeking, has been examined in the literature. In the present study, advanced empirical methodologies using datasets from Zephyr/BVD Orbis and fDi Markets were employed to undertake an international comparative analysis based on large samples. The focus of the analysis concerned the shifts in FDI establishment modes: the decline in strategic asset seeking cross-border mergers and acquisitions (SAS CBMAs), and the rise in greenfield FDI related to R&D offshoring by EMNEs, as well as the outcomes of such FDI strategies.
The results show that Springboard Theory omits a now crucial aspect of EMNE catch-up strategy, namely the use of greenfield FDI to establish foreign R&D hubs in global innovation centres. Springboard Theory assumes that acquired strategic assets residing in target firms are largely non-location bounded, and that these strategic assets are portable, however, the findings also indicate that location boundedness (i.e., ‘stickiness’) of strategic assets may be more common than is generally recognised. As such, the SAS CBMAs process is arguably more complex, and the evidence suggests that Springboard EMNE acquirers, expend considerable efforts to grow such location-bound foreign target intangible assets in situ. Contrary to the idea of SAS involving a ‘looting’ process, the findings suggest that EMNEs bring considerable resources and market opportunities to target firms, and when conditions for Intellectual Property Rights (IPR) protection are strong, the EMNEs commitment to the target’s intangible asset performance is stronger. This supports ‘institutional arbitrage’ as an important strategy for EMNEs hoping to catch-up. Institutions are, however, location bounded and cannot be transferred to the EMNEs home market, which is an inconsistency in Springboard Theory, which assumes EMNE seek better institutions (which may facilitate innovation, for example) when, in fact, they also transfer strategic assets home. The capability to generate strategic assets in the longer term, however, is tied to these location bounded institutions, leading to the need for significant investments in the target firm.
The results also show that EMNE’ parent firms engaging in greenfield SAS related FDI, actually outperform those doing SAS CMBAs, which casts further doubt on another underlying premise of Springboard Theory, that CBMAs are used as the main means of accelerated catch-up for EMNEs. The findings clearly evidence that greenfield SAS related FDI projects are more common in EMNEs than DMNEs, pointing towards alternative, possibly more viable, routes for EMNE catch-up in the current geopolitical climate dominated by strong techno-nationalist policies and shaped by economic confrontation between the US, Europe and China.