Post-transition multinationals Magdolna Sass MTA KRTK, Hungary 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Outline Work in progress Background Research question Theoretical background/review of the literature on the topic Method Main findings: new typology Conclusion – further research 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Background Emerging multinationals from former transition economies Quick growth since around the mid-nineties (e.g. Kalotay, 2008; Radlo, Sass, 2012; Gorynia et al., 2012) Emergence of some successful large (regional) multinationals, and numerous quickly internationalising through FDI, mainly small and medium-sized firms 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Main aim – research question To analyse whether post-transition multinational companies are different than developed country multinationals and emerging multinationals? Post-transition multinationals are perceived as MNCs coming from the new member states of the EU, thus e.g. Russian MNCs are not considered to be part of that group. 5th AIB-CEE conference, Cracow, 12-15 September, 2018

A short review of related theoretical literature Distinction between developed country (classical) and emerging (Third world) multinationals – differences between their characteristics (e.g. Lall, 1983; Andreff, 2003) Discussion wether existing theories may explain the emergence of emerging MNCs (e.g. Buckley et al., 2007; Kalotay, Susltarova, 2010; Narula, 2006 on one hand - Matthews, 2002 on the other hand) (Extended) OLI (adding specific OA elements) may be suitable (Ramasamy et al., 2012; Ramamurti, 2012; Buckley et al, 2007; Kalotay, 2008) Distinction between country-specific advantages and firm-specific advantages, - important for emerging multinationals (see e.g. Lall, 1983; Curevo-Cazurra, 2007; Andreff-Balcet, 2013) 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Specific circumstances in the former transition economies, inherited from pre-transition, where.. No market in operation, virtual prices, international competitiveness could not be evaluated (estimated to be very low) (Gorzelak, 1996) State-ownership: limited independent company strategy Basically closed economies, CMEA-trade organised and controlled at the state-level, limited contacts with the non-CMEA world economy (Kornai, 1993) Limited FDI (representative offices for helping exports, politics- related) Thus heritage – environment (country-specific – even country-group specific factors) important and distinct from that of both developed and developing country multinationals: important factors shaping OA (especially OAt and OAi) of (potential) multinationals 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Specific circumstances in the former transition economies in the post-transition era Membership in the European Union Results in a level playing field concerning regulations compared to other EU members A considerably reduced risk factor for foreign direct investments (especially withing the EU) Political stability, economic convergence, liberalisation of trade and capital, regulation quality, IP rights etc. influenced by EU membership - important factors from the point of view of OFDI (Demekas, 2007) Similarly important and specific to EU members institutional factors shaping OA (and LA, when investing in another EU member) 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Direct precedents in the literature Andreff (2003): new multinationals from (former) transition economies are becoming similar to Third world multinationals – at the time of the start of the latter’s internationalisation of Third world multinationals (late 70s) Svetlicic (2004): new multinationals from (former) transition economies are different from both developed country (of 20 years ago) and emerging multinationals in many areas Hoskisson et al. (2013): new multinationals from mid-range emerging economies: need to move beyond a simple dichotomy that divides multinational companies into developed and emerging; Importance of (home and host country) institutional factors Stoian (2013) CEE MNCs distinct from other emerging economies; they have different economic fundamentals and different policy challenges; importance of institutional factors, these latter specific to CEE 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Data Data constraints very serious Macro-level: problem – no distinction between direct and indirect OFDI in the statistical data (BPM6 – ultimate owner for inward FDI only) That is why: going down to micro/company level, wherever possible – company case studies Concentrating on: Hungary and Poland plus Czech Republic due to data availability (company cases) 5th AIB-CEE conference, Cracow, 12-15 September, 2018

New typology of post-transition MNCs Takes into account heritage in the form of State influence (ownership) and changes in it Whether the investor company existed in the pre-transition era Dynamism: movements between categories Why is that important? Because of the specific (institutional) circumstances (country specific and country-group specific) mentioned in the case of post- transition economies: closed, non-market pre-transition era; post- transition era with EU influence and (more or less) a functioning market economy 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Typology of post-transition MNCs   state influence no state influence inherited (minority) state-owned, former SOEs privatised former SOEs new strong links to politics as a basis for quick growth newly established 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Company cases state influence no direct state influence inherited new   state influence no direct state influence inherited CZ: CEZ HU: MOL, OTP, Richter Gedeon PL: PKN Orlen, PGNiG, LOTOS, Ciech, KGHM CZ: Meopta, Metrostav HU: Videoton, Masterplast, Zalakerámia PL: Synthos, Polimex-Mostostal, Kopex, Koelner, Kety, Fasing, Apator, Sniezka, Relpol new CZ: Agrofert? HU: TriGránit PL: ? CZ: Avast, Qualcat, EPH, Jablotron, Kenvelo, Racom… HU: Waberer, MPF, Mediso, Jász-Plasztik, Solvo, Lambda- Com, Balabit, Matusz-Vad, AAM, Pureco…. PL: Asseco, Bioton, Selena, AB, Cognor, Ferro, Comarch, PZ Cormay, Decora, Wielton, Toya, TelForceOne, Redan, Aplisens, Bakalland…. 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Areas of analysis – comparing the four types of multinationals Size Motivation Mode of entry Location advantage/geographical area of expansion Sectors/industries/activities Based on company cases of locally-owned/-controlled multinational firms 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Size Motivation Mode of entry Ownership advantage   Group 1: state influence, inherited Group 2: state influence, new Group 3: no state influence, inherited Group 4: no state influence, new Size Largest, comparable to emerging multinationals Medium-large Small-medium, a few large Motivation Mixed (depending on the activity), dominantly market seeking, but cases of natural resource seeking (oil-gas) and strategic asset seeking (pharma) Mixed, mainly market-seeking Mixed, mainly market-seeking, but certain efficiency-seeking as well Mode of entry M&A, first privatisation-related M&A Mixed (M&A and greenfield) Mainly greenfield (small size) Ownership advantage OAt, OAi important – at least at the start of foreign expansion: cases of successful change (e.g. OTP) OAt, OAi important OAt – in the first years of foreign investments, later: OA: intangible asset based – similar to developed country multinationals OA: similar to developed country firms’ Location advantage/ geographic area of expansion Mainly the CEE / post-transition region (exc. for natural resource seeking and for tax optimisation) Mainly the CEE / post-transition region (plus tax havens for tax optimisation) Mainly the CEE / post-transition region The whole world, mainly developed countries (plus) Sectors/industries Activities “strategic” (or deemed to be): oil-gas, energy, financial services, (pharma) Real estate, food – „regulatory dependent” Manufacturing, (some services: construction) Various, many innovative manufacturing and services

Further research This is a work-in-progress, trying to show that due to their heritage and the specific circumstances of their reintegration into the world economy, emerging multinationals from post-transition countries (and mainly CEE EU members) are different from both developed and developing country multinationals The difference results from the heterogeneity of group categories, identified in the paper – and mainly from the extent of state influence and whether the company existed before the transition Certain company categories are similar to developed country MNCs’ characteristics (esp. no state influence-new) Other company categories are more similar to emerging MNCs (esp. state influence- inherited and state influence - new) However, this difference may whither over time Further areas of analysis: especially OA; and similarities and differences with developed country and (other) emerging MNCs 5th AIB-CEE conference, Cracow, 12-15 September, 2018

Thank you for your attention! 5th AIB-CEE conference, Cracow, 12-15 September, 2018