1 / 15

Emerging Russian Multinationals: Challenges and Opportunities

Emerging Russian Multinationals: Challenges and Opportunities. Sergey Filippov (UNU-MERIT) Maastricht, The Netherlands Copenhagen Business School, 10 Oct 2008. Motivation for Research.

benjamin
Download Presentation

Emerging Russian Multinationals: Challenges and Opportunities

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Emerging Russian Multinationals: Challenges and Opportunities Sergey Filippov (UNU-MERIT) Maastricht, The Netherlands Copenhagen Business School, 10 Oct 2008

  2. Motivation for Research • Increasing interest towards multinationals from emerging economies among IB scholars (e.g. Dunning and Narula, 1998; Goldstein and Shaw, 2007; Benito and Narula, 2007). • Yet, the focus is mainly on China and India, or BRIC(S) in general • Scant literature explicitly addressing Russian multinationals (e.g. Heinrich, 2003; Kalotay, 2005, 2008; Vahtra and Liuhto, 2006) • Explorative investigation in order to get a better understanding of the idiosyncratic nature of Russian emerging multinationals and contribute to relevant literature

  3. Historical Timeline • Soviet Capitalism • “Shallow” internationalisation of state-owned enterprises / “red multinationals” • 1987: 72 soviet MNCs in 22 capitalist countries • The 1990s: Cowboy Capitalism • Distribution of state property among a selected few • “A class of effective owners” / “oligarchs” / “appointed billionaires” • Growth of large companies in the financial sector • The 2000s: Russia Goes Global • Rise of the commodity prices and hence growth of companies in resource-based sectors • Impressive growth dynamics of outward FDI • internationalisation of large Russian companies • strengthening of their foothold abroad

  4. Stocks of outward FDI of BRICS economies (mln USD) Source: UNCTAD, World Investment Reports of respective years

  5. Emerging Multinationals in Global Ranking • Forbes 2000 List (2007): 109 CN, 48 IN, 34 BR, 17 SA, 16 MX • 29 Russian companies with capitalisation of around $ 1 trillion • Fortune 500 List (2007): • BCG100 (Russia: 6) and Skolkovo 25 • Only Gazprom and Lukoil appear in all four ratings Source: author’s calculation based on Fortune 500 list Note: Fortune 500 includes Hong Kong-based companies in the list of Chinese firms

  6. Motives of Internationalisation: Pull factors (Dunning, 2003) • Resource-seeking • Oil industry and steel making (oil in AZ, iron ore in KZ) • Market-seeking • Retail chains, mobile telecom (CIS), downstream oil sector (US and Western Europe) • Efficiency-seeking • Acquisition of factories in neighbouring countries / corporate consolidation / integration of value chain (CIS) • Asset-seeking • Acquisition of technologically-advanced companies in developed markets (Renova acquired Oerlikon / Sulzer AG in CH)

  7. Motives of Internationalisation: Push factors • Instability at home • “System escape” motivation (Bulatov, 2008) • To escape economic volatility and political instability • Access to capital overseas • Underdeveloped financial market in Russia • IPO in London

  8. Internationalisation: Mode of entry • Traditional Greenfield vs. M&A trade-off • Non-equity partnerships: strategic alliances Source: UNCTAD, WIR 2007, Thomson Platinum M&A

  9. Acquisitions vs. alliances • Russian companies are active in M&A: • 309 (in 2000)  616 (in 2007) • Especially in Russia itself and CIS • Since mid-2000s: rising interest towards assets in Western Europe (53 deals in 2007) and Northern America (10 in 2007) • Strategic alliances • Number is smaller but rising: 50 (2000)  152 (2007) • When entering developed markets of Western Europe and Northern America, many Russian companies tend to rely on strategic alliances • Strategic alliances as a way to access the partner’s technological competence

  10. Geography of Internationalisation • Commonwealth of Independent States • Re-establishment of Soviet links (corporate consolidation), access to resources and emerging markets • Test of new products before launching them at home (e.g. launch of 3G network in Belarus by MTS) • CIS countries prefer Russian investors vis-à-vis Western ones • Eastern Europe • Familiar environment, yet political sensitivities of uneasy past • Impact of EU enlargement: Gateway to Single Market • Western Europe and Northern America • Access to technology and mature markets (e.g. Novolipetsk Steel acquired DanSteel A/S in 2006) • Africa • Natural resources (diamonds, nickel) and retail banking • “Axis of Evil” • Cuba, Sudan, Iraq, Iran, Libya, Syria. • Former close relations and ties from the Soviet times

  11. Corporate R&D in Russian MNCs • Only one Russian company (Gazprom) in Global 1250 R&D Scoreboard • Soviet heritage: state-owned research institutes • Privatisation and integration in the corporate structure • Primarily in the traditional sectors, well-developed in the Soviet times (e.g. Lukoil) • Strategic alliances with western partners • Access to technology and knowledge (e.g. Yukos / Schlumberger) • Particularly in high-tech, such as mobile telecom (e.g. MTS, Beeline) • Acquisition of assets overseas • Acquisition of a company as “a full package” and singling out R&D unit (e.g. Basic Element and Magna Int, auto parts maker)

  12. State Policy on Outward Investment • No explicit state policy on support of OFDI • Is there an implicit state policy? • Speculations over politically-driven motives of internationalisation of Russian companies • Gazprom is often portrayed as Kremlin’s arm • President Medvedev openly encourages Russian businesses “to copy China” (go global): • Global expansion would "allow us to retool Russian enterprises with technology, boost their production culture and grant them the opportunity to diversify investments and win new markets". • Pledges “government’s support” for acquisition of assets overseas, especially in energy and high-tech industries

  13. Russia & Europe • Russian investments in Europe: small but increasing • Only €3bn in EU as opposed to €30bn of EU investments in Russia • Unreliable statistics (offshore schemes and manipulations) • Acquisitions rather than greenfield • Access to knowledge and expertise • Concerns over the motives and nature of Russian companies • Russian companies as agents of Russian government • Concerns over “Russian way of doing business” • Prospects: • “Depolitisation” of investment relations • The Partnership and Co-operation Agreement (PCA)

  14. Avenues for further research • Subsidiaries of emerging multinationals • Competence • Subsidiary evolution • Technology transfer / knowledge flows within emerging multinationals • Host country policies in the face of arrival of emerging (Russian) multinationals

  15. Tak for lån nemlig jeres opmærksomhed! • www.filippov.eu • filippov@merit.unu.edu

More Related