Bite-size Case Study

Politics and emerging multinational enterprises

Published on October 31, 2021 Originally recorded 2021   6 min
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Political relations are of particular importance for business affairs in emerging markets, where the government traditionally plays a significant rĂ´le. Therefore, EMNEs invest in political resources, not only to safeguard their interests via bargaining with the host countries' authorities, but also to reap home government support for their outward investments. Home governments in emerging markets use various tools to encourage and promote outward OFDI, such as insurance programs, special loans and guarantees, the elimination of double taxation, and the relaxation of restrictions on inbound FDI. Government also provides domestic multinationals with information services indicating business opportunities abroad. This is supported by the evidence of both state-owned and private Russian MNEs in various sectors. For example, in resource-based sectors (such as Rosatom and Rosneft), in banking (Sberbank and VTB), in defense (Sukhoi and Rosoboronexport), or in technology-intensive sectors (with the examples of Kaspersky and Yandex).
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The government also intervenes in the internationalization process of emerging multinationals via lobbyism. EMNEs are rich and powerful entities in their home markets, and thus have resources and linkages to influence government decisions. Russian Gazprom is an illustrative example of a government-supported company in the IB arena. In the year 2006, the European Commission announced a plan to divide up the assets of companies that generate, transmit, and distribute natural gas. This plan was unfavorable for Gazprom. Then in the year 2007, the Russian President Vladimir Putin met with the then President of France, Nicolas Sarkozy, and after this meeting France announced its protest against the European Commission plan. This protest was also supported by Gaz de France, the major partner of Gazprom in the French market. In the end, the European Commission's plan was rejected.
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Politics and emerging multinational enterprises

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