Internationalization of Asian MNCs in

Transcription

1 Internationalization of Asian MNCs in Brazil: Factors and Motivations Gilmar Masiero University of São Paulo, Brazil Mário Henrique Ogasavara University of Fortaleza, Brazil

2 Agenda Introduction Overview of Asian FDI in Brazil Timing of market entry Factors and Motivations for FDI Methodology Analysis and Discussion Conclusion

3 Introduction Firm internationalization MNCs from developed countries (i.e. US and Europe) New players -> emerging countries Global Latinas Dragons MNCs Fortune Global 500 (2011) 1/3 (163) Asian MNCs 38% ranking 2005

4 Introduction Asian MNCs studies Japanese and recently Chinese firms Operating in developed and Asian countries Few studies of Asian MNCs in Latin America ( Brazil) Brazil Main recipient of investments among LA countries 30.4% of all FDI inflows -> first decade 21 st century Asian FDI -> Japan, South Korea and China

5 Introduction Research questions Are there significant differences in the main factors considered by Asian MNCs when investing in Brazil? What are the motivations of early Asian MNC entrants? How do early Asian contrast with later entrants who have only established subsidiaries in Brazil in the last decade?

6 Overview of Asian MNCs in Brazil Japanese FDI 1 st wave of investments (1930s) Investors pioneers-> agriculture and textile industries 2 nd wave of investments (1970s) 13% of total FDI in Brazil Partnership with large scale government projects in basic industries (petrochemical, aluminum, pulp and paper) Slowdown 1980s-1990s Brazil -> economic problems; Japan -> lost decade 3 rd wave of investments (Late 1990s 2000s) Celebration of 100 years of Japanese immigration in Brazil

7 Japanese subsidiaries in Brazil by year and sector ( ) Manufacturing Primary Services Wholesale

8 Overview of Asian MNCs in Brazil South-Korean FDI 1 st wave of investments (1990s) Korean policy shift presence Korean firms abroad 31 Korean companies entering in Brazil Slowdown late 1990s Asian economic crisis 2 nd wave of investments (mid-2000s) Automobile and electronics industries

9 Overview of Asian MNCs in Brazil Chinese FDI New player in 2000s Chinese policy of Going global strategy 2010 FDI of US$ 12.7 billion in Brazil Mostly acquisitions of foreign companies operating in Brazil US$ 1.5 billion -> greenfield investments

10 FDI from Asian countries to Brazil ( )

11 Trade Flow (US$ billion) Brazil China South Korea Japan Export Import Total Trade

12 Timing of market entry Importance of timing in the firm internationalization First mover Prior research -> performance Economic, preemptive, technological and behavioral factors Ecology population model RBV Late mover Can also gain advantages Resolution of technological and market uncertainty Inertia of early entrants Introduce newer and better products and services

13 Factors and Motivations for FDi Dunning (1993) Market-seeking Resource-seeking Efficiency-seeking Strategic motives-seeking IMF (2009) Market size and growth prospects Infrastructure cost Political environmental Legal and regulations aspects

14 Methodology Data source Primary data : Survey Questionnaire in 5 languages (ENG, POR, JAP, CHI, KOR) Sample 195 companies confirmed the receipt of survey At least 3 contacts by phone 31 answered the survey (one duplicate entry) Final: 30 Asian firms (15,4% response rate) Early entrant (before 2000) 56% and Late entrant 44% of our sample Tests No problem related to non-response bias T-test statistics to compare differences between early and late entrants

15 Descriptive Statistics by entry timing Industry sector Location 20% Machinery & Equipment Sao Paulo state (84%) 12% each -Transportation,Banking, 8% each - Automobile parts, Chemicals, Software, Telecommunication Entry mode 44% WOS 22% Licensing 17% JV 6% acquisitions 11% others

16 Descriptive Statistics by country of origin Japanese firms More experienced in the local market Higher number of expatriates and employees Larger in terms of investment capital Korean firms Higher annual revenues - Sample of companies in the financial and automobile industry

17 Factors to invest in Brazil Market factors Human Resource factors Infrastructure factors Political & Governmental factors Legal & Regulatory factors Tax Related & Economic factors

18 Factors to invest in Brazil (main) by entry timing All Cases Market Tax related /economic Human resource Early entrants Legal and regulatory Tax related /economic Human resource Late entrants Market Tax related /economic Legal and regulatory

19 Factors to invest in Brazil (main) by country of origin

20 Factors to invest in Brazil (Detailed) by entry timing

21 Factors to invest in Brazil (Detailed) by country

22 Motivations to invest in Brazil Market-seeking Resource-seeking Efficiency-seeking Strategic asset-seeking

23 Motivations to invest in Brazil (main) by entry timing

24 Motivations to invest in Brazil (main) by country of origin

25 Motivations to invest in Brazil (Detailed) by entry timing

26 Motivations to invest in Brazil (Detailed) by country of origin

27 Preliminary insigths from the survey I Chinese flows of FDI are promising due US$ 13 billions just in An historical record from Esat Asia and any other single region Despite the world crisis an East Asia (Japanese and Korean) new wave of FDI is happening in Brazil The size and growth of the Brazilian market were the most and human resources the least considered factor for East Asian companies to establish operations in Brazil Market-seeking was the most and efficiency-seeking the least strong motivation to invest in Brazil Technical & Financial support to invest in Brazil varies a lot from each of East Asia MNT and country The perception and the impact of the legal & fiscal system were considered the most important by all Asian MNT All the Administrative, Political, Social & Cultural Systems (mainly complicated administrative procedures) were scored high in both perception and impact

28 Preliminary insigths from the survey II Unstable exchange rates were considered very important and obtaining finacial support the least important by all East Asian MNT Dificulties in recruting managers and workers were considered very important by all the companies operating in Brazil Underdeveloped infrastructure, supply and logistics were also considered very important by all East Asia companies operating in Brazil The findings and insigths about the main aspects of EastAsian companies operations in Brazil must be carrefully studied to better design government and corporate policies to keep and deepen the interest them in the Brazilian market.