Introduction formulated by Dunning (1998) that seeks to explain

Introduction¬†Over the past two decades, emerging multinationals known as EMNEs, which are based in emerging markets such as Brazil, Vietnam and China, have started to expand and operate internationally by competing with traditional MNEs from affluent countries. EMNEs are becoming more increasingly important in this global economic landscape due to their accelerated growth. Hence, it is vital to understand these firms, their motivation of investments and strategies implemented. However, this phenomenon has stimulated numerous debates on whether existing International Business (IB) theories are able to understand how this EMNEs functions. Furthermore, there are evident differences between EMNEs and traditional MNEs. This essay will look into different theoretical frameworks that explain the motivations, behaviors and decision-making process of EMNEs. However, despite the prevalent differences in these theories, the purpose of this essay is not to enter fully on the theoretical debate on the applicability and appropriateness of these theories. Instead, it is hoped that how these theories explain in their own term on the decision-making process of why MNEs expand internationally.OLI FrameworkThe OLI framework is a theory formulated by Dunning (1998) that seeks to explain the internationalization process by highlighting the importance of 3 key conditions that influence the firm’s decision to expand internationally which will ultimately determine the firm’s choice of entry mode.Ownership advantages consist of intangible assets such as patents, management skills and technology. In order to expand internationally, firms must possess these ownership advantages over local firms in host countries (Dunning, 1988). These advantages should also be sufficient enough to overweigh the costs for operating and setting up foreign activities in order to achieve transaction-based advantages (Dunning, 2001). The second condition the choice of location. There must be location advantages associated with the host country such as lower tax system or favorable FDI policies from government in order to fit alongside with the company’s core competences (Eden and Dai, 2010). Dunning (1988) study states that most firms only venture abroad when it is accustomed to their best interest to combine both ownership and location advantages. Makino, Lau and Yeh (2002) further assert that this combination can create new or improvised competences, which gives an edge over their competitors.Lastly, the presence of internationalization advantages is essential for firms instead of being reliant on the market (Eisenhardt, 1989). The assumption holds that market imperfection is the key driver for foreign market investment. Thus, internalization should materialize if the cross-border transfer of ownership advantages is more beneficial and efficient as compared to selling value-adding activities to third parties (Dunning, 2001). As a result, many firms prefer investing abroad rather than relying on exports or licensing.OLI framework helps to explain the rationale and motives of firms’ international expansion decision through these three key conditions. Dunning (1993) emphasizes that these conditions are interdependent whereby firms has to consider thoroughly during their decision. For an instance, Dunning and Lundan (2008) have noted that by selecting a market location might elevate or decline the ownership factor of the framework. Therefore, firms must ensure that all three OLI conditions are simultaneously satisfied before going forward with the international expansion decision (Dunning and Lundan, 2008). However, this theory is built based on developed multinationals, thus it is vital to test the applicability of the framework on emerging multinationals.Differences between EMNEs and developed (300-400 words)It is evident that EMNEs has distinct differences in advantages as compared to traditional MNEs. The rapidly growing and substantial local markets has offered them platform and cash to expand internationally. However, EMNEs face several disadvantages as compared to DMNEs due to weak institutional environment and market constraints in their home countries (Ramamurti and Singh, 2009). This led to EMNEs facing lack of technological-based ownership advantages and managerial capabilities (Ramamurti and Singh, 2009).