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Thanks but no thanks: State-owned multinationals from emerging markets and host-country policies

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Abstract

I study the impact of the internationalization of state-owned companies from emerging markets on host-country government policy. Whereas the literature commonly recommends that host-country governments design policies to attract foreign direct investment, governments instead question or block investments by state-owned firms from emerging markets. I address this conflict between theory and practice by separating the causes of this behavior into six types depending on the characteristics of the firm (i.e., state ownership and emerging market origin) and the logic (i.e., economics, politics, and psychology). I suggest the development of ex-ante rule-based policies that provide clarity, address concerns, and support the benefits of inward investments, while limiting state capture by domestic interests. Thus, I explain how economic concerns over national security sectors and strategic technologies can be dealt with via exclusion, the political worries over opacity and weak governance can be addressed through monitoring, and the psychological anxieties of unfriendly governments and loss of relative status can be ameliorated using controls.

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  1. D’Amore-McKim School of Business, Northeastern University, 360 Huntington Avenue, 313 Hayden Hall, Boston, MA, 02115-5000, USA

    Alvaro Cuervo-Cazurra

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Correspondence to Alvaro Cuervo-Cazurra.

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Accepted by Narjess Boubakri, Area Editor, 23 August 2018. This article has been with the author for two revisions.

I thank the encouragement of Editor Ari van Assche to write this article. I also thank Associate Editor Narjess Boubakri for managing the review process and two anonymous reviewers for providing very detailed and useful suggestions for improvement. I am grateful for useful comments on previous versions of the article from Jonathan Doh (for the title), Tim Devinney, Rian Drogendijk, Sergio Lazzarini, Arie Lewin, Marjorie Lyles, William Newburry, Sam Park, Bertrand Quelin, and participants at the CEIBS emerging market conference and the Strategic Management Society special conference in Sao Paulo and the Academy of International Business annual conference in Minneapolis. I also thank the Lloyd Mullin fellowship for financial support. This article was written while on sabbatical at Northeastern University.

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Cuervo-Cazurra, A. Thanks but no thanks: State-owned multinationals from emerging markets and host-country policies. J Int Bus Policy 1, 128–156 (2018). https://doi.org/10.1057/s42214-018-0009-9

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