While Western multinational corporations (MNCs) have traditionally taken their domestic strengths ‘outward’ to the rest of the world to exploit already existing firm-specific competitive advantages, the multinational from emerging economies have no such pre-existing strengths and therefore, their motive for internationalization is primarily to acquire competitive advantages that they lack, such as marquee brands and managerial expertise. Most of their overseas growth has occurred in the last decade or so and in a very short span of time, they have spread their global network, mainly via acquisitions in a constant cycle of ‘linkage, leverage, and learning’.
Indian multinationals have been quick learners in internationalization both in scale and speed. One of the core strengths of Indian firms is to extract maximum value from even ailing businesses by applying innovative and cost effective methods that they have developed over the years in an extremely resource constrained and uncertain domestic environment. Their unique approach to international growth, which some label as ‘compassionate capitalism’ manifests in several ways, such as a preference for sustainable growth without compromising core values, long-term commitment to their businesses despite economic turbulences, faith in the management team of the acquired overseas companies and commitment to employees in terms of job security and investment in training. The ‘fire in the belly’ attitude of emerging multinationals is evident in the way they are pushing the top management in the companies that they have acquired abroad to stretch their goals.
Indian MNCs do face multiple hurdles in furthering their internationalization strategies
While their management philosophy is grounded in Indian heritage that focuses on social mission and employee welfare, they have adopted several best practices from developed markets, such as metrics driven performance management. However, unlike Western multinationals which tend to adopt an ethnocentric approach to managing subsidiaries in developing markets, Indian multinationals seem to adopt a highly localized approach as reflected in their staffing and decision making process. They also show clear signs of an ‘adaptive approach’ in managing subsidiaries in developed markets.
Indian MNCs do face multiple hurdles in furthering their internationalization strategies. For example, despite attempts to localize their workforce in different geographies, their global management team is still predominantly Indian but increasingly their systems and to some extent their management mindset are becoming global. They also tend to centralize decision making power in the headquarters for fear of losing control. They recognize that to become a truly global corporation, they need to develop a global mindset and employee base. While this vision is being somewhat hampered by the liabilities of country of origin, foreignness, newness and smallness, they are steadily acquiring the critical mass to differentiate themselves as innovative global players.
With regard to human resource (HR) strategies and practices, Indian multinationals are clearly focused on linking HR strategy to business strategy and harnessing the potential of intellectual capital by creating an environment of trust and transparency, adopting a long-term vision in managing performance and business cycles, investing heavily in employee training, providing internal growth opportunities, empowering employees, integrating people, culture and systems, and being a good corporate citizen by working with and for the local communities.
Increasing investment by emerging economies in developed as well as emerging markets, particularly via mergers and acquisitions means that there is a greater need for management practitioners to understand the ways in which MNCs from emerging economies strategize and act in diffusing and coordinating management practices. For too long, international management literature and practice have been embedded in Western thinking and concepts with little cross-pollination. Accordingly, reexamining the management approaches and practices of MNCs from newer industrialized and developing economies such as India that facilitates ‘travel of ideas’ is likely to remain a key research issue for the next decade, given the speed of economic development and the increasing influence and numbers employed by such companies. Accordingly, the India model is worth considering in drawing lessons on how to navigate the changing contours of the 21st century global economy.
Featured image credit: Delhi city smog, by wili hybrid. CC-BY-SA-3.0 via Wikimedia Commons.