Old Wine in New Bottles: A Comparison of Emerging Market TNCs Today and Developed Country TNCs Thirty Years Ago (John H Dunning, Changsu Kim and Donghyun Park)


Traditionally, the vast majority of transnational corporations (TNCs) that operate across borders have originated from developed countries such as the United States (US), Japan and members of the European Union (EU). Large and well-established TNCs such as Coca Cola, Toyota or Siemens are almost invariably from such countries. In the context of TNCs, we tend to associate the role of emerging markets2 primarily as the destination of TNCs from developed countries, for example, US software companies setting up research facilities in India, Japanese manufacturers establishing production facilities in China, or British banks acquiring financial institutions in Brazil. Until quite recently, this widespread perception of developed countries as homes of TNCs, and emerging markets as hosts of TNCs, had been firmly rooted in empirical reality (Dunning 1993). While, as will be described elsewhere in this chapter, there were TNCs from emerging markets in the past, they were nowhere near as active or visible as they are today.


In line with their growing relative significance in the global economy, many emerging markets are now becoming important outward foreign direct investors (UNCTAD 2006). At a broader level, the growth of TNCs from emerging markets reflects their rapid economic development and growth (Dunning and Narula 1996). The four newly industrialized economies of Hong Kong (China), the Republic of Korea, Singapore and Taiwan Province of China now have per capita income levels approaching those of developed countries. In other words, some emerging markets have become rich enough to export capital to the rest of the world. However, the growth of TNCs from emerging markets is by no means limited to the most successful or to the most industrialized developing countries. Asian countries other than the newly industrialized economies, including China and India, major Latin American economies such as Brazil and Mexico, as well as South Africa have all spawned their own TNCs. It is possible to interpret the growth of such cross-border activity as evidence of the growing ability and willingness of emerging-market firms to make investments outside of their home countries (Bartlett and Ghoshal 2000). Indeed some of these firms, such as the Republic of Korea’s Samsung and Hyundai, India’s Tata and Malaysia’s Sime Darby, have become truly global players with operations all over the world (UNCTAD 2006).

Given that most TNCs have come from developed countries in the past but that an increasing number of emerging market firms are investing outside of their national boundaries, it is both interesting and worthwhile to examine the differences between the two groups of firms. Indeed, the central objective of this chapter is to compare and contrast the contemporary emerging-market TNCs with the traditional developed-country TNCs. We shall set out some similarities and differences in the industrial and geographical patterns of outward FDI from the two groups of countries and shall suggest that these similarities and differences may be due both to factors that are exogenous to both groups—especially the current wave of economic globalization—and to those endogenous to them, such as government policies toward outward FDI. We hope that our comparative study will help provide the reader with a better understanding of outward FDI and TNCs from emerging markets, which is an issue of growing global significance.

Working Paper