Country specific advantage, firm specific advantage and multinationality – Sources of competitive advantage in emerging markets: Evidence from the electronics industry in China

• The extant literature on emerging market multinationals (EMNEs) suggest that they derive their advantages from country-specific advantages (CSAs) such as economies of scale, as opposed to traditional firm specific advantage (FSA) such as technology.
• We use firm level data from the Chinese electronics industry and an empirical methodology that has thus far not been used in the literature to provide clear empirical support for this proposition.
• Further, we demonstrate that not all emerging market firms can leverage CSAs equally and that EMNEs are better at exploiting CSAs than their non-MNE domestic counterparts.
• We also demonstrate that developed country MNEs operating in emerging market economies are not as good as leveraging available CSAs as their EMNE competitors, arguably on account of liability of foreignness.
• Our results have implications for outward investment by emerging market firms as well as for the ability of developed country MNEs to significantly benefit from efficiency-seeking FDI in emerging market economies.

The extant literature on emerging market multinationals (EMNEs) suggest that they derive their advantages from country-specific advantages (CSAs) such as economies of scale, as opposed to traditional firm specific advantage (FSA) such as technology. We use firm level data from the Chinese electronics industry and an empirical methodology that has thus far not been used in the literature to provide clear empirical support for this proposition. Further, we demonstrate that not all emerging market firms can leverage CSAs equally and that EMNEs are better at exploiting CSAs than their non-MNE domestic counterparts. We also demonstrate that developed country MNEs operating in emerging market economies are not as good as leveraging available CSAs as their EMNE competitors, arguably on account of liability of foreignness. Our results have implications for outward investment by emerging market firms as well as for the ability of developed country MNEs to significantly benefit from efficiency-seeking FDI in emerging market economies.