Transcript Exploring the Guenon Mystery: An Evolutionary Analysis

Why EMNEs Are Better for
Host Countries than DMNEs
Ravi Ramamurti
Northeastern University, Boston
[email protected]
March 31, 2009
U of Reading Conference, Reading, UK
In POOR Countries...
EMNEs are Clearly Superior
 Unlike DMNEs, EMNE products are optimized for EM
consumers
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Features: e.g. ruggedness, ease of O&M (weak infras.)
Processes: less capital-intensive, more local inputs
Prices that are highly affordable
 “Affordability innovation” led by EMNEs has brought
technology to the masses in home and EM host countries
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BOP movement triggered by EMNEs, not DMNEs
Huge welfare gains: reaching 10x-20x customers
Like the difference between invention and commercialization..
E.g. Bharti Airtel in telecom services
© Ravi Ramamurti
(Continued)
 More jobs, more local sourcing, more tech spillovers, less
“crowding out” in host countries
 Especially in LDCs with weak institutions
 If you are a poor country, would you prefer?
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Tata Motors or General Motors?
Bharti Airtel or Verizon and Vodafone?
Huawei or Lucent and Nortel?
Grameen Bank or Citibank and Bank of America?
Haier or Maytag?
Ranbaxy or Pfizer?
© Ravi Ramamurti
Advice to Next President, Nov 19, 08
For RICH countries, too,
EMNEs contribute a lot
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Training DMNEs on how to succeed in EMs:
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IBM learns from Indian IT firms, Nokia from Ningbo, etc
EMs will account for 60% or more of global GDP growth
Strengthening competition, disturbing cozy oligopolies, benefiting
consumers
Speeding up and lowering NPD costs (production to R&D)
Reviving mature industries (cement, steel, white goods, PCs) and
Facilitating adjustment to globalization
Helping to keep costs/inflation down by becoming low-cost supply
partners of DMNEs (Hon Hai, Infosys, GVK Pharma, etc)
Occasionally operating in global tech frontier and being global firstmovers in new industries (Embraer, Suzlon, Huawei, etc)
© Ravi Ramamurti
 So, if you ask which type MNE—DMNE or EMNEtypically does the greatest good for the greatest
number in host and home countries, then EMNEs
beat DMNEs hands down!
© Ravi Ramamurti
EMNEs do have FSAs
 Affordability innovation thru
local optimization and dramatic
cost reduction is non-trivial
capability
Absorptive capacity
Capital engineering skills
Knowledge, customer intimacy
Mid-tech
businesses:
EMNEs
Operational excellence, project
management skills
Late-mover advantages in mid-tech
industries
Low-tech
businesses:
Local firms
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High-tech
businesses:
Western MNEs
 Global first-movers in some cases
© Ravi Ramamurti
This presentation brought to you
by…
Contributions by
 Yair Aharoni
 Alice Amsden
 Andrea Goldstein
 Don Lessard
 Alan Rugman
 Dan McCarthy
 Sheila Puffer
 Lou Wells
 Peter Williamson
etc
Cambridge U Press, 2009
© Ravi Ramamurti