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

2. 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, September, 2018

3. 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, September, 2018

4. 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, September, 2018

5. 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, September, 2018

6. 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, September, 2018

7. 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, September, 2018

8. 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, September, 2018

9. 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, September, 2018

10. 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, September, 2018

11. 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, September, 2018

12. 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, September, 2018

13. 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, September, 2018

14. 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

15. 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, September, 2018

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