The Co-Evolution of Pro-Market Reforms and Emerging Market Multinationals

Abstract

I study the relationship between pro-market reforms and the expansion of emerging market multinational companies (EMNCs). Extending institutional economics, I propose a co-evolutionary process, whereby pro-market reforms in emerging markets induce the transformation of domestic firms into EMNCs, and the global expansion of EMNCs in turn facilitates the deepening of pro-market reforms in the home country. Specifically, I first explain how pro-market reforms lead to the emergence of EMNCs via international competitiveness, upgrading needs and escape; I then explain how the global expansion of EMNCs leads to a deepening of pro-market reforms at home via learning, spillovers and lobbying. I complement these explanations with a discussion of contingencies at the firm (private vs. state, domestic vs. foreign firms), industry (global vs. local industries) and country (developing vs. transition countries) levels.

Keywords: pro-market reforms, emerging market multinationals, international business

JEL Classification: F23