The Internationalization Process of Multilatinas from Chile

The Internationalization Process of Multilatinas from Chile

Wolfgang Albeck (University of Mannheim, Germany) and Steffen Huth (University of Mannheim, Germany)
DOI: 10.4018/978-1-4666-6224-7.ch012


Due to the strong economic position of Chile within Latin America and the existing deficit of research, this chapter focuses on Emerging Market Multinational Enterprises (EMNEs) from Chile. It draws upon institutional theory to analyze case studies on the internationalization process of 19 Chilean firms with outward Foreign Direct Investments (FDI). The authors find that market-seeking FDI is the major motivation for investing abroad. With respect to the geographical scope of outward FDI, the authors investigate that Latin America is the dominating destination for outward FDI by Chilean firms. Moreover, the results show that acquisitions and joint ventures are popular when investing in developed economies, whereas both greenfield investments and acquisitions are chosen most often when entering other emerging economies. Finally, the authors observe that Chilean firms internationalize rather late in their life cycle (i.e., they need a long time span between foundation and the first outward FDI). However, the authors do not find support for the proposition that Chilean firms enter a second or third foreign market faster when the cultural distance of the market is low.
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In the past, globalization was primarily considered as a one way street, whereas Multinational Enterprises (MNEs) from triad markets (US, Europe, and Japan) entered either other Western countries or emerging economies (Wright et al., 2005). However, within the last couple of years FDI outflows from emerging markets have risen enormously. Following a clearly upward trend, the 2013 World Investment Report informs that shares of FDI outflows from emerging and transition economies jumped from approximately 10% cent in the year 2000 to an impressive 30.6% in 2012 – the highest share ever recorded. Amid the increasing and remarkable FDI flows from emerging economies, a growing number of Emerging Market Multinational Enterprises (EMNEs) are now operating internationally and have even become global leaders within their specific industries. Thus, in the last couple of years researchers have begun studying the internationalization of companies with origin in these markets; however, there remains a huge lack of knowledge in this field.

Therefore, more research is needed to bridge the existing research gap and obtain further information about the internationalization of EMNEs (Athreye & Kapur, 2009; Demirbag et al., 2009). Yet, the majority of the published literature on the internationalization of EMNEs has concentrated on Asia in general and on China (i.e., Buckley et al., 2007; Child & Rodrigues, 2005; Deng, 2009) or India (i.e., Pattnaik & Elango, 2009; Gauer & Kumar, 2009; Gubbi et al., 2010) in particular. However, it is very surprising that to date Latin America and its firms have only received little attention in International Business research (Casanova, 2009; Cuervo-Cazurra, 2008). Within Latin America, Chile has become one of the most important outward investors, and in 2009 was even ranked first place by FDI outflows (ECLAC, 2011). So far, most research about Latin America has focused on Brazil and to a smaller amount on Mexico while Chile has been neglected. Additionally, Cuervo-Cazurra (2007) acknowledges that until now only little attention has been given to the internationalization process of EMNEs.

Therefore, this chapter focuses on the internationalization process of EMNEs from Chile. The overall research question is as follows: What specifics do the internationalization processes of Chilean firms show? In more detail we are interested in shedding light on four different dimensions. First, we ask about the main motivations for Chilean outward FDI. Second, we examine the preferred destinations for outward FDI. Third, we analyze the dominant entry modes. Finally, we investigate the speed of entrance. In order to answer these questions, we investigated the internationalization process of 19 large Chilean firms using secondary data. We believe our findings will provide valuable insights into a previously under researched topic in International Business.

After the Introduction we review the recent literature on Multilatinas and highlight why we focus on Chilean firms. In the following section, we investigate the influence of the Chilean government on the internationalization of Chilean firms. We then extract a set of propositions and explain the process used for selecting and analyzing the case studies. Following the research design we analyze and discuss the internationalization process of Chilean firms. Finally, the chapter concludes with a summary of our findings, some limitations, as well as possible directions for future research.

Key Terms in this Chapter

Chile: A republic with 17 million inhabitants located in Latin America.

Emerging Market Multinational (EMNEs): Multinational Enterprise that is headquartered in an emerging market and engaged in outbound FDI.

Case Study: A research strategy which focuses on understanding the dynamics present within single settings. Especially suitable for research seeking to answer “how” and “why” questions.

Emerging Economies: Low-income and rapidly growing countries that use economic liberalization as their primary engine of growth.

Internationalization: Process in which firms increase their involvements in international operations.

Foreign Direct Investments (FDI): A cross-border investment by a resident enterprise from one economy in an enterprise resident in another economy with the objective of obtaining a lasting interest.

Multilatinas: An Emerging Market Multinational headquartered in Latin America.

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