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Transforming disadvantages into advantages: developing-country MNEs in the least developed countries

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Abstract

We analyze the advantages and disadvantages of developing-country multinational enterprises (MNEs) in comparison with developed-country MNEs. Developing-country MNEs tend to be less competitive than their developed-country counterparts, partly because they suffer the disadvantage of operating in home countries with underdeveloped institutions. We argue that this disadvantage can become an advantage when both types of MNE operate in countries with “difficult” governance conditions, because developing-country MNEs are used to operating in such conditions. The empirical analysis shows that, although developing-country MNEs rarely appear among the largest MNEs in the world, they are more prevalent among the largest foreign firms in the least developed countries (LDCs), especially in LDCs with poorer regulatory quality and lower control of corruption.

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Notes

  1. We follow UNCTAD's (2004) classification of countries into developed and developing. Developed countries are: Canada, United States, Andorra, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Malta, Monaco, Netherlands, Norway, Portugal, San Marino, Spain, Sweden, Switzerland, United Kingdom, Israel, Japan, Australia, and New Zealand. All other countries are classified as developing countries.

  2. We would like to thank an anonymous referee for bringing this to our attention.

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Acknowledgements

The comments of the Associate Editor Pankaj Ghemawat, anonymous reviewers, Jim Hagen, Tom Murtha, Steve Tallman and participants at the Strategic Management and Organization Seminar at the University of Minnesota and the Academy of International Business Annual Meeting helped us improve previous versions of the paper. The paper was developed while the first author was an Assistant Professor and the second author was a PhD student at the University of Minnesota. The first author would like to thank the University of Minnesota International Programs for financial support and the Applied Economics and Management Department at Cornell University for its hospitality during the revision of the manuscript. The second author would like to thank the Carlson School of Management Dissertation Fellowship for financial support. All errors remain ours.

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  1. Sonoco International Business Department, Moore School of Business, University of South Carolina, Columbia, USA

    Alvaro Cuervo-Cazurra

  2. Department of Management, Baruch College, City University of New York, New York, USA

    Mehmet Genc

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  1. Alvaro Cuervo-Cazurra
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Correspondence to Alvaro Cuervo-Cazurra.

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Accepted by Pankaj Ghemawat, Departmental Editor, 28 December 2007. This paper has been with the authors for two revisions.

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Cuervo-Cazurra, A., Genc, M. Transforming disadvantages into advantages: developing-country MNEs in the least developed countries. J Int Bus Stud 39, 957–979 (2008). https://doi.org/10.1057/palgrave.jibs.8400390

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