EMB
AT A GLANCE
As emerging market firms seek a place on the global stage,
some are shifting their HQs to advanced economies to access
the infrastructure, networks and resources that will give
them an edge. In doing so, they earn the label, migrating
multinationals. Such migration, however, is not for everyone,
and there are many questions that a company should consider
before taking flight.
• Are the majority of your shareholders, competitors,
or customers based abroad?
• Does your company suffer from liability of origin?
• Do the rewards outweigh the costs?
• Have you considered the long-term impact of migration
on your company?
• How will your country’s government perceive your decision
to migrate?
• What are your ambitions?
• Can you achieve the global or regional success you seek from
your home base?
are likely to shift their headquarters—or at least some
headquarter activities—abroad. But although multinationals
from anywhere in the world do this, the phenomenon is
especially widely found among emerging multinationals.
EMB: Does an emerging market company need to migrate
to achieve global success? HB: No. Of course, emerging
market firms can achieve global success without leaving
home—Mexican multinational building materials company
CEMEX serving as a case in point. The multi-billion dollar firm
was founded in Mexico in 1906 and its HQ remains firmly on
Mexican soil. Several examples can be taken from India too,
with companies such as multinational conglomerates Tata
Group and Mahindra Group, both headquartered in Mumbai.
However, there may be cases where migrating is beneficial,
not least for businesses from countries that suffer from
a phenomenon known as liability of origin. If a firm’s home
country brings with it negative connotations or is associated
with corruption, political or economic instability, weak
infrastructure or tough operating conditions, then one way of
managing that liability is to change your home country.
EMB: What are the benefits to an emerging market multinational
company (EMMNC) of migrating its headquarters to a more
advanced economy? HB: The main advantage is that it provides
access to better institutional infrastructure, such as more
developed financial markets, better established channels for
conducting business, and greater access to other global markets.
Migrating can also offer a wider and more diverse mix of skilled
talent. In addition, being physically present in a global economic hub
in Europe, America or Asia can bring a company closer to powerful
economic decision-makers that impact business worldwide.
Overarching all of these points is the fact that for companies
with serious global aspirations, migrating is often a very useful
signal to indicate that you’re ready to join the big players in
your industry. Raising your profile and aligning yourself with
leading firms on the global stage can help boost compa ny
growth, development and status.
There is also a wider benefit, which extends beyond migrating
the headquarters to migrating other aspects of a business
too. It was long assumed that strong firms emerge from
strong countries. Thus US multinationals emerged because
the US boasted a large market, abundant skills, sufficient
venture capital and so on. But if firms can quilt together the
skills they need from various locations, then the link between
the attractiveness of a location and the strength of its firms
becomes far more tenuous. The ambitions of an entrepreneur
in a developing country are no longer limited purely by what is
available in the home country. Instead, his or her knowledge and
networks in the global economy becomes far more important.
EMB: Given that most emerging market multinationals
are still headquartered in their home countries, there
must be significant disadvantages or barriers associated
with migrating, too. What factors deter companies from
making the leap? HB: As a company, if you’re big enough to
successfully migrate, you’re most likely attracting attention
from your government, which may perceive your intentions as
disloyal to the nation. This is an important factor for migrating
multinationals to consider, especially if the bulk of their
operations and sales are set to remain in the country of origin.
A second issue is that companies that migrate go from being
big fish in a small pond, to being small fish in a big pond. You
may have been the employer of choice in your home country,
but that is unlikely to be the case in London, New York or
Tokyo. You might be heading to a place with greater availability
of skilled labor, but there, you could find yourself at the bottom
of the pecking order.
Then there is the impact on decision-making. If you are not
yet a global player, and if the majority of your revenues are
still generated from your home region, then shifting your
headquarters overseas can dilute decision-making capacity and
lead to a disconnect. The experience of the multi‑billion dollar
banking and insurance group Old Mutual—a South African
company now headquartered in London—shows how hard it
can be to get that balance right.
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