Developing Russian Multinationals: Challenges and Opportunities

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Rising Russian Multinationals: Challenges and Opportunities Sergey Filippov (UNU-MERIT) Maastricht, The Netherlands Copenhagen Business School, 10 Oct 2008

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Motivation for Research Increasing premium towards multinationals from developing economies among IB researchers (e.g. Dunning and Narula, 1998; Goldstein and Shaw, 2007; Benito and Narula, 2007). However, the attention is mostly on China and India, or BRIC(S) when all is said in done Scant writing unequivocally tending to Russian multinationals (e.g. Heinrich, 2003; Kalotay, 2005, 2008; Vahtra and Liuhto, 2006) Explorative examination keeping in mind the end goal to show signs of improvement comprehension of the quirky way of Russian rising multinationals and add to applicable writing

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Historical Timeline Soviet Capitalism "Shallow" internationalization of state-claimed ventures/"red multinationals" 1987: 72 soviet MNCs in 22 entrepreneur nations The 1990s: Cowboy Capitalism Distribution of state property among a chose few "A class of viable proprietors"/"oligarchs"/"selected extremely rich people" Growth of extensive organizations in the budgetary division The 2000s: Russia Goes Global Rise of the ware costs and henceforth development of organizations in asset based areas Impressive development elements of outward FDI internationalization of expansive Russian organizations fortifying of their a dependable balance abroad

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Stocks of outward FDI of BRICS economies (mln USD) Source: UNCTAD, World Investment Reports of separate years

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Emerging Multinationals in Global Ranking Forbes 2000 List (2007): 109 CN, 48 IN, 34 BR, 17 SA, 16 MX 29 Russian organizations with capitalisation of around $ 1 trillion Fortune 500 List (2007): BCG100 (Russia: 6) and Skolkovo 25 Only Gazprom and Lukoil show up in each of the four evaluations Source: writer's estimation in light of Fortune 500 rundown Note: Fortune 500 incorporates Hong Kong-based organizations in the rundown of Chinese firms

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Motives of Internationalization: Pull components (Dunning, 2003) Resource-looking for Oil industry and steel making (oil in AZ, press mineral in KZ) Market-looking for Retail chains, versatile telecom (CIS), downstream oil segment (US and Western Europe) Efficiency-looking for Acquisition of manufacturing plants in neighboring nations/corporate solidification/coordination of significant worth chain (CIS) Asset-looking for Acquisition of innovatively propelled organizations in created markets (Renova procured Oerlikon/Sulzer AG in CH)

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Motives of Internationalization: Push variables Instability at home "Framework escape" inspiration (Bulatov, 2008) To escape monetary unpredictability and political shakiness Access to capital abroad Underdeveloped money related market in Russia IPO in London

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Internationalization: Mode of passage Traditional Greenfield versus M&A exchange off Non-value organizations: key cooperations Source: UNCTAD, WIR 2007, Thomson Platinum M&A

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Acquisitions versus organizations together Russian organizations are dynamic in M&A: 309 (in 2000) ��  616 (in 2007) Especially in Russia itself and CIS Since mid-2000s: rising premium towards resources in Western Europe (53 bargains in 2007) and Northern America (10 in 2007) Strategic collusions Number is littler however rising: 50 (2000) ��  152 (2007) When entering created markets of Western Europe and Northern America, numerous Russian organizations have a tendency to depend on vital unions Strategic unions as an approach to get to the accomplice's mechanical capability

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Geography of Internationalization Commonwealth of Independent States Re-foundation of Soviet connections (corporate combination), access to assets and developing markets Test of new items before propelling them at home (e.g. dispatch of 3G system in Belarus by MTS) CIS nations incline toward Russian financial specialists opposite Western ones Eastern Europe Familiar environment, yet political sensitivities of uneasy past Impact of EU broadening: Gateway to Single Market Western Europe and Northern America Access to innovation and develop markets (e.g. Novolipetsk Steel gained DanSteel A/S in 2006) Africa Natural assets (precious stones, nickel) and retail saving money "Vile forces that be" Cuba, Sudan, Iraq, Iran, Libya, Syria. Previous close relations and ties from the Soviet times

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Corporate R&D in Russian MNCs Only one Russian organization (Gazprom) in Global 1250 R&D Scoreboard Soviet legacy: state-claimed inquire about foundations Privatization and incorporation in the corporate structure Primarily in the customary areas, all around created in the Soviet times (e.g. Lukoil) Strategic collusions with western accomplices Access to innovation and learning (e.g. Yukos/Schlumberger) Particularly in cutting edge, for example, portable telecom (e.g. MTS, Beeline) Acquisition of benefits abroad Acquisition of an organization as "a full bundle" and singling out R&D unit (e.g. Fundamental Element and Magna Int, car parts producer)

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State Policy on Outward Investment No express state arrangement on support of OFDI Is there an understood state strategy? Theories over politically-determined intentions of internationalization of Russian organizations Gazprom is regularly depicted as Kremlin's arm President Medvedev straightforwardly supports Russian organizations "to duplicate China" (go worldwide): Global extension would "allow us to retool Russian endeavors with innovation, help their creation culture and allow them the chance to enhance ventures and win new markets". Promises "government's support" for procurement of advantages abroad, particularly in vitality and innovative enterprises

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Russia & Europe Russian interests in Europe: little yet expanding Only €3bn in EU instead of €30bn of EU interests in Russia Unreliable measurements (seaward plans and controls) Acquisitions as opposed to greenfield Access to information and ability Concerns over the thought processes and nature of Russian organizations Russian organizations as operators of Russian government Concerns over "Russian method for working together" Prospects: "Depolitisation" of venture relations The Partnership and Co-operation Agreement (PCA)

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Avenues for further research Subsidiaries of developing multinationals Competence Subsidiary advancement Technology exchange/learning streams inside rising multinationals Host nation approaches even with landing of rising (Russian) multinationals

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