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  • Subject Name : International Business Management

Executive Summary

It is very well clear that the traditional model of Multinational enterprises is fading. Technical change, globalization, and the era of emerging nations have tended to facilitate the enhancement of a new kind of MNE wherein foreign direct investment is determined by exploiting the competencies that are firm-specific and by exploring the novel ways of innovation and accessing the markets.

This paper looked into various aspects of emerging economies of the southern hemisphere and the recent developments that have taken in recent years. Moreover, the existing research gaps have also been provided in the paper. The paper ended with the conclusion and a research problem that is required for future studies.


Executive summary


Key theories 

Identifying significant texts

Summarizing key debates

Reflection on recent developments

Gaps in prior research 

Conclusion- identifying research problem



There is no doubt that in the last 20 years one of the significant developments has been the growth of emerging economies which was once represented by a minimum of 15% out of the total global economy and at present it accounts for approximately 50% of the economic activities. These economies have been growing at a faster pace that is located across the globe and mainly includes Brazil, Indonesia, South Africa, Latin America, New Zealand, Australia, and a few more (Gaur, Kumar & Kumar, 2014). Some of these nations have been recognized as the exporters of the manufactured goods whereas others are indulged in selling energy, agricultural or mineral commodities.

Moreover, in the past few years, these emerging economies are also considered to be the key sources of FDI, foreign direct investment (Paul Benito, 2018). This means that these are the enterprises that based in the emerging economies and have expanded all through the globe by creating acquisitions along with the establishment of operations related to distribution and manufacturing, not only in the developing nations and emerging economies but also in the developed ones, thereby becoming MNEs, Multinational Enterprises.

This essay is going to discuss the emerging economies of the southern MNEs and recent developments. It will also look into the gaps in the existing research wherein new research could be carried out. The paper will be concluded with the formulation of a research question.

Key Theories

The Emerging Market Multinationals have been referred in various ways that mainly include “third-world multinationals”, “unconventional multinationals”, “latecomer firms” or “emerging multinationals” These MNEs have been regarded as the major players in the foreign direct investment as well as cross-border acquisitions.

There are considered to be a host of theories that attempt to illustrate the reason for Multinational Enterprises and these theories provide an answer to few significant questions such as what are motivational factors for the national companies to produce in foreign countries or why distinct norms are taken into consideration by MNEs for investment? (Amighini, et al., 2015).

The Alibar Theory illustrated these Multinationals Enterprises with the help of financial market relations such as "preferences of the market to hold assets that are denominated within the selected currencies" and “exchange risks”. Moreover, Alibar provided the reason that the flow of MNEs is usually from the areas of strong currency to the areas of a weak currency.

Moreover, location theory, in one of its theory of “supply oriented location” explained that the production is carried out wherein the factors costs for production are least. On the other hand, "demand-oriented theory" provides information that the location of the market and competitors govern the location of the firm. When these two theories are taken together give rise to the emergence of the Multinational Enterprises due to four major locational factors such as raw materials, cheap labor, protected and untapped markets, and transportation costs (Kim Aguilera, 2016).

Furthermore, Hymer-Kindleberger theory also known as “structural market imperfection”, “oligopolistic power” and “industrial organization” theory is based on two types of incentives oligopolistic or monopolistic advantages, in which the firms of the home country enjoyed over the firms of host country along with the exclusion of competition between the enterprises of various countries (Teece, 2014). In theory, Hymer mentioned that international companies do not function under the circumstances of perfect competition.

Another theory is the internationalization theory of MNEs which was based on the fact that the internationalization of the market all through the national boundaries results in the emergence of Multinational Enterprises. Verbeke & Kano (2015) stated that the internationalization theory cleaves to the fact that the minimum cost location is chosen by the firms for every activity performed by them and the internationalization of markets lead to the emergence of the firms up to the level wherein the benefits of having further internationalization are oppressed by the costs.

Identifying Significant Texts

The propagation of the MNEs has taken into consideration observers, scholars, and policymakers and just a decade ago the majority of these organizations were considered to be marginal competitors. However, in the contemporary era, these MNEs are challenging the other most established and accomplished multinationals of the world in terms of a broad range of markets and industries.

The existence of multinational firms is mainly due to the proprietary advantages and economic conditions that make it possible and advisable for them to advantageously embark on the production of products and services in the foreign location (Charaia, 2017). Additionally, the most representative case of FDI is considered to be the horizontal expansion occurring at the time of the establishment of the plants or any service delivery facility with the foreign region having the goal to sell its goods within the market and also with no abandonment of goods produced within the home country.

Moreover, in current decades, flows of foreign investment to the emerging and developing nations have received substantial attention concerning policy-making and academic circles. South-south FDI accounts for approximately one-third of total FDI moving to the developing nations and thereby growing (Khan, 2014). This is a positive activity since the FDI is reaching extremely deprived and remote developing nations. This is due to the reason that Southern Multinationals Enterprises have become more recognizable with the challenging climates of investment and are also considered to be appropriately prepared to deliver goods that have been tailored to the consumers belonging to low-income. The FDI flows of these regions are mainly regional and concerted within the infrastructure as well as extractive sectors along with the enhancement in the sector diversification (Sethi, 2009).

The Southern MNEs are usually attracted to the new markets that are profitable and also to the strategic assets and resources. However, the motivation is fewer about looking for low factor costs signifying that the developing nations should not be less concerned about these outflows of FDI. Moreover, the government of these developing nations has been encouraging the outward flow of FDI, Baskaran, et al. (2017) noted that Southern MNCs persist to face challenges in terms of operational and regulatory within their home economy. The majority of the Southern MNEs that are new within the international market are considered to have growing pains and are constantly climbing the steps of corporate social responsibility.

According to Klein, Wocke Hughes (2014), in recent decades, South Africa has gained a lot and also can immensely offer in comparison to various other countries of Africa. Moreover, the country attracts numerous professionals and huge multinationals and has been home to 75% and above of total world-class firms in Africa. To name a few global enterprises with existence in South Africa are Barclays Bank, the Standard Bank Group, Volkswagen, Vodafone, and General Electric along with Sanlam, MTN group, and Sasol.

The features used by Brazil match with those of China and India wherein it has floated various state-owned enterprises. At the same time, Brazil has kept its doors open for multinationals and European companies such as Volkswagen, Unilever, and Nestle that have been capable to establish huge businesses there (Meyer, 2014).

On the other hand, Latin America has spelled a tremendous growth since the last few decades that has been transformed into lower poverty rates, higher income, and the rise of the middle class. This developed established a sense of hope, progress, and opportunity in the country.

Summarizing Key Debates

South-South investment is considered to be a developing element of global FDI having three key drivers of FDI emerging from one economy to another. The first one is the rush for resources at places like Africa that have resulted in the scrambling of deals by the Asian governments as well as public sector companies of natural resources (Eestrin et al., 2018). Secondly, there have also been synergistic acquisitions and mergers between two nations within the emerging economies. The last one is, the emerging market of multinationals can sell abroad their business models along with the income levels and characteristics analogous to their home nations.

There is a tremendous difference between the traditional and emerging MNEs and the most startling one is related to the improved speed of internationalization of the emerging MNEs since there have been attempts to close the loopholes between the global presence and market reach of the MNEs of the developed countries.

Reflection on Recent Developments

There has been a differentiated approach to the emerging markets which is considered to be the most crucial in the landscape of global business being redefined radically with the rise of economic nationalism along with the swift broadening of digital technologies. Skillfully employment digital technologies have become extremely significant for the success of emerging markets wherein businesses and people are becoming rapidly interconnected.

According to Rottig (2016), while entering into a new region, the MNEs are likely to begin within the mature market and eventually leading to the expansion outwardly. Based on the industry, Northern America has the entry point as Morocco or Egypt whereas various other nations tend to enter Nigeria before the expansion into the neighboring markets of Western African.

Another reason distinguishing MNEs as the winner is their approach of flexibility in expanding or launching business within the emerging markets. Such enterprises may choose to have joint ventures, mergers, and acquisitions, franchises, or Greenfield investments while depending upon the circumstances and location.

Moreover, to have a place within a new emerging market, the company must produce products considered to be appropriate for the consumers at affordable prices. The majority of the Multinational enterprises offer existing brands as well as products and services related and adapted to the requirements and preferences of the consumers of low-income. There have been innovations to overcome the challenges of infrastructure that are quite common within the developing economies such as inadequate access to smooth roads and electricity (Wu, Chen & Jiao, 2016).

There has been a tremendous shift in the banking, construction, and engineering sector along with mining and crude oil production. Furthermore, emerging markets of Southern MNEs not only have enhanced their investment broad but have also contributed significantly inroads within the global corporate world.

Gaps in Prior Research

In comparison to their rapidly significant role within the global economy, there is a lesser-known fact about their financial reporting activities within the emerging economies. It is crucial to have an investigation of determinants related to the quality of financial reporting along with its impact on the information asymmetries.

Moreover, there is a need for alternative perspectives for explaining corporate governance practices specifically in the emerging economies. The amendments in the domestic economies led in the undertaking of market-oriented economic reforms that further witnessed the implementation of widespread liberalization and privatization of economies along with the expansion of market institutions like stock markets. This kind of development noted the significance of corporate governance which requires a lot of research related to emerging economies.

Conclusion- identifying the research problem

The review could be concluded by stating that emerging markets are of extreme importance for the southern MNEs. Moreover, these new MNEs are the outcome of replication of the well-established MNEs of the developed or rich nations as well as innovation in reaction to the atypical distinctiveness of developing and emerging countries. The context within which their global expansion has happened is also pertinent. Moreover, to get benefitted from South-South FDI, most of the developing nations, either home or host to FDI, are required to practice investment climate reforms. As we know that these emerging markets have a great role to play for southern MNEs but it also has few challenges that are required to be taken into consideration such as political instability, unavailability of a reliable and quality business partner, strong labour unions, massive bureaucracy, lack of transparency and so on. Hence, there is an urge for conducting thorough research related to the emerging markets of southern MNEs for understanding the strategic actions to cope up with the various challenges and hindrance taking place in the development of these markets.


Amighini, A., Cozza, C., Giuliani, E., Rabellotti, R., & Scalera, V. G. (2015). Multinational enterprises from emerging economies: What theories suggest, what evidence shows. A literature review. Economia e Politica Industriale, 42(3), 343-370.

Baskaran, A., Liu, J., Yan, H., & Muchie, M. (2017). Outward foreign direct investment (OFDI) and knowledge flow in the context of emerging MNEs: Cases from China, India and South Africa. African Journal of Science, Technology, Innovation and Development, 9(5), 539-555.

Charaia, V. (2017). The Role of Multinational Enterprises’ Investments in Emerging Country’s Economic Development, Case of Georgia. International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, 11(3).

Estrin, S., Meyer, K. E., & Pelletier, A. (2018). Emerging Economy MNEs: How does home country munificence matter?. Journal of World Business, 53(4), 514-528.

Gaur, A. S., Kumar, V., & Singh, D. (2014). Institutions, resources, and internationalization of emerging economy firms. Journal of World Business, 49(1), 12-20.

Khan, M. A. (2014). Challenges for MNEs operating in emerging markets. Available via: www: aabri. com/LV2014Manuscripts/LV14045. pdf.[Retrieved on 05/05/2016].

Kim, J. U., & Aguilera, R. V. (2016). Foreign location choice: Review and extensions. International Journal of Management Reviews, 18(2), 133-159.

Klein, S., Wöcke, A., & Hughes, J. M. (2014). Leaving home: Relocation choices of South African multinational enterprise (MNEs). African journal of business management, 8(8), 253-269.

Meyer, K. E. (2014). Process perspectives on the growth of emerging economy multinationals. Understanding Multinationals from Emerging Markets, 169-194.

Paul, J., & Benito, G. R. (2018). A review of research on outward foreign direct investment from emerging countries, including China: what do we know, how do we know and where should we be heading?. Asia Pacific Business Review, 24(1), 90-115.

Rottig, D. (2016). Institutions and emerging markets: effects and implications for multinational corporations. International Journal of Emerging Markets.

Sethi, D. (2009). Are multinational enterprises from the emerging economies global or regional?. European Management Journal, 27(5), 356-365.

Teece, D. J. (2014). A dynamic capabilities-based entrepreneurial theory of the multinational enterprise. Journal of international business studies, 45(1), 8-37.

Verbeke, A., & Kano, L. (2015). The new internalization theory and multinational enterprises from emerging economies: A business history perspective. Business History Review, 89(3), 415-445.

Wu, H., Chen, J., & Jiao, H. (2016). Dynamic capabilities as a mediator linking international diversification and innovation performance of firms in an emerging economy. Journal of business research, 69(8), 2678-2686.

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