Title: Internationalization and Value-Creation Performance of Latin American Multinationals: The Case of Outbound Foreign Direct Investment
Abstract: ABSTRACT Understanding the internal sources of acquiring market strength has implications for corporate strategic decisions and competitive behavior as firms expand their cross-border business activities in their home region and around the world. This paper focuses on the sources of value creation in Latin American multinationals (LAMNEs). The basic premise of this paper is that a set of managerial skills and corporate strategies that leverage internal resources and capabilities coupled with strategic decisions to enter specific industries are driving the creation of market values among LAMNEs. This paper presents a conceptual framework and empirical evidence on internal management capabilities in deploying resources that help explain variations in market values generated by the largest Latin American firms. (ProQuest: ... denotes formulae omitted.) INTRODUCTION AND RESEARCH QUESTIONS The number of Latin American firms that operate in cross-border production has increased steadily over the past decade. Analysis of foreign direct investment (FDI, hereafter) data shows that out-bound investments by these firms exist in a variety of industries at all levels of scale production (UNCTAD, 2006; Forbes, 2007). Prominent Latin American multinational enterprises (LAMNEs, hereafter) include CEMEX of Mexico, EMBRAER of Brazil and Banco de Chile, which operate in the cement, aircraft manufacturing and financial services industries respectively. These companies have joined the ranks of Forbes Global 2000 firms as the largest multinationals in the world (Forbes, 2008). This trend is in marked contrast to previous years when Latin American firms lagged behind their counterparts from other regions, including the emerging markets of Asia (UNCTAD, 1995). Once established as global firms, how do these firms perform, in terms of creating market value for their stakeholders? What are the sources of this value creation? The basic thesis of this paper is that a set of managerial skills and corporate strategies that leverage internal resources and capabilities coupled with strategic decisions to enter specific industries appear to be driving the creation of market values among LAMNEs. The goal of this paper is to present a conceptual framework and empirical evidence on internal management capabilities in deploying resources that help explain variations in market values generated by the largest Latin American firms. Understanding the internal sources of acquiring market strength has both implications for corporate strategic decisions and competitive behavior as firms expand their cross-border business activities in their home region and around the world. Research Questions To achieve this goal, the paper addresses three research questions as follows: * What are the likely internal operational capabilities embedded in firm resources that enhance value creation in LAMNEs? * What are the sources of these internal efficiencies in Latin America's largest firms? * What are the strategic implications of these value creation activities among large LAMNEs engaged in cross-border investments? Answers to these questions may throw light on whether or not LAMNEs are more or less like their older, traditional counterparts from North America, Western Europe and Japan upon whom most international business research has been based. Thus, can the FDI activities of LAMNEs be explained by the internationalization processes and motives of outbound FDI, as current theories such as the O-L-I model of the Eclectic Paradigm proposed by Dunning (1995, 1988), or the transaction cost models (e. g. Hill & Kim, 1988) would suggest? RELATED LITERATURE AND CONCEPTUAL FRAMEWORK There are compelling reasons for investigating the forces that drive performance of Latin American multinational enterprises (LAMNEs). First, as newcomers in the global marketplace of foreign direct investment (FDI), there is a natural intellectual curiosity about these firms that marks them as targets for research investigation. …
Publication Year: 2012
Publication Date: 2012-04-01
Language: en
Type: article
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Cited By Count: 2
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