Foreign market selection by Russian MNEs – beyond a binary approach?

Abstract

Purpose -The purpose of this paper is to address the internationalization of Russian multinationals by critically challenging existing assumptions about "springboard" foreign market selection by emerging market firms. Design/methodology/approach -The authors studied foreign market selection decisions for 497 international merger and acquisition (M&A) and joint venture ( JV) deals completed by Russian multinational enterprises (MNEs) between 1997 and 2009. The statistical model tests the impact of the geographic, political and economic distances of the host country from Russia on Russian MNEs' foreign market selection decisions. Findings -Contrary to existing assumptions, the host country's geographic closeness to Russia, and its being an ex-USSR republic or a tax haven, positively affected the country's probability of attracting an M&A or JV deal by a Russian MNE, while the similar level of economic development did not significantly influence the MNEs' foreign market selection decisions. The patterns of significance among the explanatory variables vary for Russian MNEs operating in the natural resources industries. Research limitations/implications -Further studies may extend the observation period, enlarge the database with Greenfield and export deals by Russian MNEs, and add cross-country cultural distances to the explanatory variables. Practical implications -Russian managers should consider the "distances" that might influence firms' foreign investment decisions. This paper also allows host country governments willing to formulate policies aimed at the attraction of Russian outward foreign direct investments to obtain a better understanding of Russian MNEs' international strategies. Originality/value -One of the few quantitative studies on the topic, this research suggests that Russian MNEs choose their own means of foreign market selection, combining gradual and leapfrog approaches to internationalization.

Some twins are not alike: FDI premia in the former Soviet states

“…As shown in Table III, the geographical patterns of IFDI and OFDI in our data are fully consistent with previous facts on Russian FDI reported in Annushkina and Colonel (2013), Filippov (2010), Liuhto and Vahtra (2007), Michailova et al (2013), Panibratov and Ermolaeva (2015) and Zubkovskaya and Michailova (2014). This is because Europe is the most important home (host) for FDI directed to (originating from) the former Soviet states, providing more than 90 percent of foreign shareholders and absorbing more than 80 percent of foreign subsidiaries.…”

“…As mentioned by Puffer and McCarthy (2011), the understanding of Russian FDI has so far remained relatively incomplete, because of the lack of sufficiently disaggregated data to permit formal analysis. This stems from the reluctance of Russian firms to reveal detailed information about their foreign activities (Annushkina and Colonel 2013 In addition, our between-group evidence reveals that FDI involvem ent of any type is m aximal for firms from the Developed countries, followed by firm s from the Developing and CIS economies.…”

Multinational Corporations from Emerging Markets

“…Hence, a strong industry bias skewed toward extractive industries has been noted in Russian outward FDI (Annushkina and Colonel, 2013;Kalotay, 2008, p. 102;Mccarthy et al, 2009). Furthermore, the managerial experience of Russian managers gained during the transition and their corresponding flexibility have been purported as giving them an edge over developed country MNCs when internationalizing into developing countries (Kalotay and Sulstarova, 2010;Kuznetsov, 2010).…”

“…The literature on Russian MNCs has converged on a number of issues: geographic and cultural proximity are strong factors in explaining the direction of outward FDI to the Commonwealth of Independent States (CIS) (Andreff, 2013;Annushkina and Colonel, 2013;Kalotay, 2008;Kalotay and Sulstarova, 2010;Kuznetsov, 2010), whereas the advantages garnered from their natural resource base and oligopolistic or monopolistic advantages in the home market have been used as an explanatory factor for the ability of Russian MNCs to compete globally. Hence, a strong industry bias skewed toward extractive industries has been noted in Russian outward FDI (Annushkina and Colonel, 2013;Kalotay, 2008, p. 102;Mccarthy et al, 2009).…”

“…Thus, elites have great leeway to assert their interests. The Russian order can be characterized as driven by three differing interests: actors interested in market competition (mainly individuals in the role of consumers), 'oligarchs' possessing huge assets interested in self-preservation and perpetuation of rents, and state actors interested in the preservation and strengthening of their power and personal profits (Annushkina and Colonel, 2013;Puffer and McCarthy, 2007). There is a further dimension of some importance -political elites at the regional level -but today they are either a proxy for the interests of the 'oligarchs' or for realizing the interests of political elites at the federal level.…”