Thanks but no thanks: State-owned multinationals from emerging markets and host-country policies

• Published in: Journal of International Business Policy Vol. 1; no. 3-4; pp. 128 - 156
• Main Author: Cuervo-Cazurra, Alvaro
• Format: Journal Article
• Language: English
• Published: London Palgrave Macmillan UK 01-12-2018; Palgrave Macmillan
• Subjects: Business and Management; Business Strategy/Leadership; Conflict theory; Emerging markets; Emerging Markets/Globalization; Foreign investment; Globalization; Governance; International Business; Multinational corporations; National security; Original Article; Ownership; Politics; Psychology; Public enterprise; Public policy; Rules; State-owned firms; agency problems; multinationals; policy; strategic industries
• ISSN: 2522-0691; 2522-0705
• DOI: 10.1057/s42214-018-0009-9

I study the impact of the internationalization of state-owned companies from emerging markets on host-country government policy. Whereas the literature commonly recommends that host-country governments design policies to attract foreign direct investment, governments instead question or block investments by state-owned firms from emerging markets. I address this conflict between theory and practice by separating the causes of this behavior into six types depending on the characteristics of the firm (i.e., state ownership and emerging market origin) and the logic (i.e., economics, politics, and psychology). I suggest the development of ex-ante rule-based policies that provide clarity, address concerns, and support the benefits of inward investments, while limiting state capture by domestic interests. Thus, I explain how economic concerns over national security sectors and strategic technologies can be dealt with via exclusion, the political worries over opacity and weak governance can be addressed through monitoring, and the psychological anxieties of unfriendly governments and loss of relative status can be ameliorated using controls.