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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.
Andreff, W. (2003). The newly emerging TNCs from economies in transition: A comparison with third world outward FDI. Transnational Corporations 12 (2): 73–118. Dhungana, B.P. (2003). Strengthening the competitiveness of small and medium enterprises in the globalization process: Prospects and challenges. Investment Promotion and Enterprise Development Bulletin for Asia and the Pacific 1. ESCAP. New York: United Nations. Dunning, J.H. and McKaig-Berliner A. (2002). The geographical sources of competitiveness: The professional business service industry. Transnational Corporations 11 (3): 1–38. Dunning J.H., van Hoesel R and Narula R. (1996). Explaining the “new” wave of outward FDI from developing countries: The case of Taiwan and Korea. Research Memoranda 009. Maastricht Economic Research Institute on Innovation and Technology. Lecraw, D.J. (1993). Outward direct investment by Indonesian firms: Motivation and effects. Journal of International Business Studies 24 (3): 589–600. Sauvant, K. (2005). New sources of FDI: The BRICs: Outward FDI from Brazil, Russia, India and China. Paper delivered to seminar “Global Players from Emerging Markets”, São Paulo, Brazil, 30 May. UNCTAD (1998). Handbook on Foreign Direct Investment by Small and Medium-Sized Enterprises: Lessons from Asia. Geneva: United Nations. References CHAPTER I 11 UNCTAD (2003). China: An emerging FDI outward investor. UNCTAD/PRESS/EB/2003/08. UNCTAD (2004a). India’s outward FDI: A giant awakening? Geneva. UNCTAD/DITE/ IIAB/2004/1. UNCTAD (2004b). World Investment Report 2004: The Shift towards Services. New York and Geneva: United Nations. UNCTAD (2004c). Outward FDI from Brazil: Poised to take off? Occasional Note. Geneva. UNCTAD/WEB/ITE/IIA/2004/16. UNCTAD (2005a). Issues note “Internationalization of Developing country Enterprises through Outward Foreign Direct Investment” (TD/ B/COM.3/EM.26/2) prepared for the Expert Meeting on “Enhancing the Productive Capacity of Developing Country Firms through Internationalization”, Geneva, 5-7 December 2005. UNCTAD (2005b). World Investment Report 2005: Transnational Corporations and the Internationalization of R&D. New York and Geneva: United Nations. United Nations publication, Sales No.E.05.II.D.10. UNCTAD (2005c). Linkages, value chains and outward investment: Internationalization patterns of developing countries’ SMEs. TD/B/ COM.3/69. UNCTAD (2005d). Policy issues related to investment and development: Emerging FDI from developing countries. Geneva. UNCTAD/TD/ B/COM.2/64. UNCTAD (2006). World Investment Report 2006: FDI from Developing and Transition Economies: Implications for Development. New York and Geneva: United Nations.
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