Emerging Markets Business Summer 2016 | Page 70

MIGRATING EMERGING MARKET MULTINATIONALS ORIGINS OF THE MIGRATING MULTINATIONAL Although the current trend started in the 1990s and involves mainly multinationals from lower income countries, it has a long history. The US agro-processing firm Bunge started out as a Dutch firm in 1818, became Argentinian in 1884, and American in 1994. The British multinational John Morrell & Co1 (now Smithfield Foods) entered the US in 1871 as the affiliate of a UK company, and by 1928 had become American with the bulk of its activities and managers in the US. Crossing the Atlantic in the opposite direction, British American Tobacco2 was first registered in the UK in 1902, and initially the headquarters, managers and dominant shareholding were from the United States. By the 1920s the British managers and shareholders were dominant, and it became (and remains) a British multinational. 1  Wilkins, M. (2004) The History of Foreign Investment in the United States, 1914‑1945. Cambridge MA: Harvard. 2  Jones, G. (2006) The End of Nationality? Global Firms and "Borderless Worlds". Zeitschrift fur Unternehmensgeschichte / Journal of Business History, 51(2): 149‑65. Finally, cost is another big factor. Relocating your headquarters to a global hub means paying much higher rents and salaries than those in your company’s country of origin. EMB: Aside from these costs and rewards, what other impact does migrating have on emerging market multinationals? HB: The short term impact on business can be limited. Often, the majority of shareholders will still be locally-based, the bulk of sales will still be made locally, and key decisions will still be made by people from the country in question. Where it starts to be consequential is a few years down the line, when real decisions begin to migrate and the network in which an emerging market multinational was embedded begins to erode or weaken. Ultimately, what this speaks to is that the home country is not adequately attractive for businesses, so there’s work to be done at the national level in terms of assessing what it would take for the country in question to become a magnet for economic activity. EMB: Beyond the multinationals themselves, how does a company’s decision to migrate impact its home economy as well as the market it is shifting its headquarters to? HB: By and large, the countries that host migrating headquarters, such as London or New York, stand to gain. The job creation and positive economic impact that results from the arrival of an EMMNC might be negligible, but the move reinforces the host country’s status as a dynamic center of economic activity and spurs other companies to consider shifting their headquarters there too. For an EMMNC’s home economy, however, the scenario is more complex. The emergence of migrating multinationals is not great news for policymakers in their countries of origin. Previously, an emerging market firm had little choice but to engage with the local infrastructure. For example, if skills were not available, the firm had to implement training programs and develop bursary or internship schemes. In the process, local skills were upgraded and entrepreneurs could start businesses to help 68  Emerging Markets Business  Summer 2016 • Issue No. 1