Global Players from Emerging Markets: Strengthening ... - Unctad

10 Global Players from Emerging Markets: Strengthening Enterprise Competitiveness through Outward Investment
policy approaches. On one hand, to the extent that
developing country firms become more competitive,
and to the extent that the home economy keeps
important aspects of its activities at home, OFDI
is likely to benefit firms from better connections to
international markets, increased productive capacity,
and more access to natural resources and strategic
assets (UNCTAD 2005b). On the other hand, there
may be adjustment costs, especially social costs in
the case of offshoring of labour-intensive activities.
Therefore, in developing policy options, consideration
should be given to maximizing the benefits of OFDI
and minimize the possible negative effects.
While there are some enterprises that would
internationalize even without government support,
some firms are constrained by a restrictive regulatory
framework. As firms face growing competition
and other constraints operating at home, policies
that hinder enterprise internationalization would
undermine the overall efforts to build national
competitiveness. There are also some firms that have
the capability to internationalize but are shying from
doing so because of the lack of information and the
fear of unknown. Developing country Governments
could consider adopting appropriate policy options,
commensurate with its stages of development,
to encourage, support and facilitate enterprise
internationalization. A capacity building programme
that aims to increase the understanding of managers
on the risks, challenges and cultural issues regarding
enterprise internationalization would be useful. The
international community can play a role in increasing
the awareness of enterprise internationalization and
its beneficial impact (as well as risk) on the home and
host countries. A capacity building programme such
as the making of global players offered by business
schools and international institutions is an area worth
consideration.
SMEs encounter a number of obstacles for
internationalizing. The common internal obstacles
are lack of international experience and management
skills. Lack of information on investment opportunities
and the host investment environment (including
unfamiliarity with the legal system and OFDI
regulations in the host country) is a more serious
problem for SMEs than for large companies. Limited
access to finance and cultural differences also hinder
OFDI by SMEs, as does difficulty in finding suitable
joint venture partners. Since the majority of OFDI by
SMEs is in the form of joint ventures, it is important
that host countries encourage the development of
their SME sector so that local enterprises have the
capability to form strategic alliances or joint ventures
with investing SMEs from abroad.