The Role of Technological Catch Up and Domestic Market Growth in the Genesis of Emerging Country Based Multinationals

The paper presents a model that evaluates how upgraded technological capabilities of emerging country based multinationals (EMNCs) and an increase in the domestic market size of large emerging countries affect value chain location choices and the competitiveness of emerging country based firms versus advanced country based ones. The model shows that, even without possessing a competitive advantage in terms of technology and/or brands, EMNCs from large or rapidly technologically advancing countries can become dominant players in the global system. The model highlights the central role of firm level technological intensity and product differentiation in determining the location of value chain activities as well as defining organizational boundaries. Empirical analysis of the location choices of the world's top multinationals from large advanced and emerging countries in 2010 supports the model's predictions