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Foreign Investments in BRIC Countries

Empirical Evidence from Multinational Corporations

Series:

Thomas Poplat

Investments in BRIC countries have been a main driver of the significant increase of cross-border investment activity in recent years. But investments in these emerging economies entail significant risks as institutional voids, host governments and national champions dictate the local business conditions for multinationals. This study investigates decision processes underlying cross-border investments in BRIC countries and discusses their critical success factors. The empirical results show how internal and external forces influence corporate decision-making efficiency. Moreover, the study highlights country-specific challenges for corporations which consider investing in BRIC countries.

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Preface

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In the course of their internationalization strategies, multinational companies under- take significant investments to establish subsidiaries and production sites in foreign countries. In 2012, worldwide foreign direct investment flows more than doubled compared to 2002 accounting for USD 1.4 trillion. Investments in emerging econo- mies were a main driver of the significant increase of worldwide foreign investment flows in recent years. In particular during the times of stagnating growth in North America and Europe, emerging economies offer substantial opportunities for multina- tional companies, but they also entail significant risks. Specifically investments in BRIC countries are exposed to various challenges, as institutional voids, host govern- ments and national champions dictate the local business conditions for multinationals. A systematic investment decision process is necessary to anticipate upcoming oppor- tunities and mitigate arising risks. In spite of the high failure rate of cross-border investments the design of foreign in- vestment decision processes in multinational corporations is largely unexplored. The work of Thomas Poplat is therefore addressing an important research gap. His focus on investment projects in BRIC countries further enhances the practical relevance of his study. Based on a multiple-case study design involving two multinational companies, Thomas Poplat interviewed more than 50 managers, business developers and man- agement accountants about their experiences with decision processes for BRIC in- vestments. The author analyzes the empirical data on the firm- and country-level and consolidates his findings in a cross-level analysis. On the firm-level, Thomas Poplat reconstructed the two company specific investment decision processes in their...

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