Why buy? Indian firms seeking partner who…

International business researchers have always been interested in the motivations for foreign direct investments. Pre-eminent IB scholar John Dunning argued that there were four core drivers:
– the quest for more customers (market-seeking)
– gaining access to inputs unavailable, or less palatable, at home (resource-seeking)
– looking to build a more efficient chain of value adding activities (efficiency-seeking)
– building up the knowledge-based resources of the firm and portfolio of brands (strategic-asset-seeking).

This recent Economist article gives a nice catalogue of recent international acquisitions by Indian firms, and offers decent examples of several fronts.

The acquisitions mentioned by Avantha (in engineering), Tata Steel and Tata Motors all can be lumped under the strategic-asset-seeking banner, as the firms sought to tap into technologies and brands unavailable in their home market and which are crucial to further international growth. This is comparable to Lenovo’s purchase of IBM’s PC business a few years back (and pretty typical for emerging market multinationals).

What is less clear in terms of motivation is what is driving Bharti Airtel’s pursuit of South African mobile giant MTN.

Are they chasing MTN’s (admittedly outstanding) competencies in rolling out networks in very poor countries (in terms of household incomes and also physical infrastructure)? These may well mesh in very well with Bharti’s own experiences in India, and set the firm up for a huge play in markets across the developing world (i.e. a strategic-asset-seeking approach).

Or they simply chasing the almost billion possible customers in Africa (to throw on top of a similar top of comparable target market in India)? This would clearly be market-seeking FDI…

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Sad news – the passing of a true scholar

The world of International Business scholars received the sad news over the weekend of the passing of one of our most respected elders – Professor John Dunning.

It is no understatement to say the John Dunning’s work lies at the very core of IB theorising and investigating. He was one of the first to explore the extent and influence of foreign direct investment (and thus multinational firms). Over decades he weaved together a coherent and insightful way of thinking about this FDI and the motivations of firms expanding in such a fashion.

These ideas have been labelled as the eclectic or OLI paradigm:

O – for Ownership advantages (which firms are attempting to extend and leverage),

L – for Location (whereby differences between countries might making leveraging more or less valuable, or generate differing motivations for expansion)

I – for Internalisation (whereby firms find hierarchical governance of international operations more efficient than market mechanisms)

It is pretty uncommon for an academic article in the IB area to not cite at least one Dunning article.

John Dunning’s influence extended far beyond putting good ideas down on paper. He was an incredibly active public intellectual. In the 1970s he created one of the strongest and most influential IB departments in the world (at Reading University). He was a key player in encouraging and guiding United Nations research into international business. He simultaneously held academic positions on two continents. He was awarded honorary doctorates from numerous institutions, and in 2008 awarded an OBE, a very rare honour for an academic in the business domain. There is a recently released autobiography that was explicitly an attempt to inspire young IB scholars which will feature in my Book Club down the track I’m sure.

Most importantly, he was a global colleague for thousands of IB scholars. He was friendly and encouraging to experienced researchers and PhD students alike. He attended conferences into his 80s and was engaged and engaging throughout. I had the immense privilege to attend what was (sadly) his last presentation to the Academy of International Business in Milan last year. As always he was jovial, challenging and humble in presenting his ideas. He will be truly missed.

Much more eloquent and touching obituaries and reflections on Professor Dunning’s life will appear over the coming days and weeks. I will break with blogging protocol and use this post as a page to gather links to those that I think give a more rounded perspective on his life and influence. So please come back to read more:

Update: Obituary from University of Reading Henley Business School, from the Times newspaper, The Guardian, by Mark Casson, and from Dunning’s local paper.