Global Turning Points The Challenges for Business and Society in the 21st Century

Running hand in hand with the extraordinary growth of emerging economies at the turn of the twenty-first century, we come across yet another clear sign that the global economy is changing. New multinational firms from countries such as Brazil, Mexico, China, India, Egypt, or Indonesia are expanding around the world, making acquisitions, and gaining market share not only in traditional industries but also in high-technology sectors. This trend has acquired such magnitude that it is rare the household anywhere around the world that does not consume or own a product branded by an emerging-market multinational (Guillén and García-Canal 2009; Van Agtmael 2007).

The figures are tantalizing. While in 1990 about 7.0 percent of all cumulative foreign direct investment in the world was accounted for by the so-called emerging-market multinationals, by the year 2000 the proportion had grown to 11.1 percent, and by 2013 it had almost trebled to 21.1 percent. In that year, emerging and developing economies accounted for 39 percent of new foreign direct investment flows. At the turn of the twenty-first century about 20.8 percent of the 64,592 multinational firms in the world were from emerging or developing countries. By 2010 the proportion had climbed to 29.1 percent of the world's total of 103,786 multinational firms (UNCTAD 2011, 2014). The economic and financial crisis that began in 2007 actually accelerated this phenomenon. While in 2008 there were 78 emerging-market firms on Fortune magazine's ranking of the world's largest 500 firms, in 2014 the figure stood at 157, with most of the increase being attributable to the number of Chinese firms, which grew from 29 to 98. A plausible scenario is that by the year 2030 more than half of cumulative foreign direct investment will be accounted for by emerging-market multinationals, and half of the Fortune Global 500 firms will be emerging-market multinationals (see the Box).

The main drivers behind this phenomenal growth in investment by the emerging-market multinationals are diverse. These firms invest in order to secure market access, inputs, and strategic assets that they lack, including brands and technologies. Many of them grew big in the domestic market and are now seeking to expand their selling opportunities by making greenfield investments and acquisitions abroad. Some of them pursued a well-defined niche market with global potential.