The Internationalization of Banks: Patterns, Strategies and Performance
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The transnationality index is calculated for each bank, combining foreign assets, foreign income and foreign staff into one index. To examine the relationship between internationalization and performance, we calculated the difference between foreign and domestic profitability.
We also investigate if more internationalization is related to more profitability. The key finding is that foreign profitability tends to be lower than domestic, and a negative relationship exists between total profitability and internationalization. This book is not yet featured on Listopia. Community Reviews. Showing Rating details. All Languages.
Internationalization of Banks: Patterns, Strategies and Performance
More filters. Sort order. There are no discussion topics on this book yet. About Alfred Slager. Alfred Slager. Books by Alfred Slager. Trivia About The International No trivia or quizzes yet. Therefore, Multilatinas represent the survivors from this phenomenon that flourished in adverse conditions through a process of '' learning-by-doing''. El presente trabajo aborda un tema que ha ido ganando importancia en el mundo actual: las Multilatinas. Today, Latin America is highly influenced from the South rather than from the North.
In fact, the emerging countries from Latin America are becoming important economic powers, as well as strong actors in the global arena, challenging not only players from other emerging economies but also world leaders from developed countries. According to Santiso , the major change in the world economy is being produced by the emerging markets owing to the fact that although they used to constitute the periphery of the globe, they are now moving to its center , displacing the role of the OECD countries. Among those enterprises, we will focus our attention on Multilatinas.
Besides, for Casanova and Fraser , Multilatinas constitute the enterprises that have taken advantage from their positions in their domestic markets in order to expand their operations through Latin America. In this paper, we will refer to Multilatinas as the multinational corporations which have their origins in Latin American countries. Although Multilatinas are not a recent phenomenon, the size and leadership that these firms have acquired are relatively new.
Actually, the Argentinean footwear enterprise Alpargatas, which is considered as the former Multilatina, established its first foreign subsidiary in Therefore, Multilatinas have existed since the XIX century.
Internationalization, Innovation, and Productivity - Oxford Handbooks
Actually, Multilatinas achieved global leadership positions only until the 90s, which differs from multinational corporations from Asian countries like South Korea, Taiwan, and Hong Kong, that became world leaders in the 70s and 80s. Nevertheless, this issue is explained because in contrast to the multinational companies from Asian countries, Latin American enterprises operated under conditions of import substitution , which limited their growth and performance.
For this reason, according to Cuervo-Cazurra a , Multilatinas have emerged today among the most influential multinational corporations throughout the world as a consequence of the Washington Consensus 4 , which referred to the economic openness and liberalization that Latin American countries experienced during the 80s and 90s. In fact, this phenomenon forced Emerging Multinational Enterprises EMNEs to improve and progress on their levels of competitiveness in order to be able to bear the challenges of internationalization.
In addition, according to Cuervo-Cazurra a , Multilatinas tend to have smaller size, less cutting-edge technology, and less sophisticated resources in relation to developedcountry MNEs Multinational Enterprises , which constitute potential disadvantages for these EMNEs. Nevertheless, Multilatinas have important advantages that pose challenges to their developed-country counterparts.
For instance, Multilatinas know how to operate in challenging institutional environments and have the impressive ability to manage difficult situations due to their experiences. Finally, Cuervo-Cazurra also emphasized that although there is a general knowledge about the internationalization process of Multilatinas, there are some lacunas regarding the behaviour of those enterprises. Likewise, they emphasize that Latin American economies have shown to be very stable in crisis times where they had being able to maintain low inflation rates and growth in some economic sectors.
Besides, Rivera and Soto recognize that there are some key factors that have influenced the internationalization process and the expansion of multinational companies in Latin America. For instance, they point out the importance and impact of the economic liberalization as a common phenomenon that occurred in the 90s. Equally, these authors state that other factors that have been essential for the internationalization process of Multilatinas are the population distribution, the education levels, and the number of FTAs that the countries of the region have.
In relation to the main common characteristics of global Multilatinas that influence the way in which they had performed their internationalization processes, Rivera and Soto emphasize the characteristics of their local markets, which are made up by demanding and price-sensitive consumers that force companies to offer high quality products at lower prices. Likewise, most of the Multilatinas are family-owned companies which facilitate the decision-making process, focused on serving the third group of the Prahalad triangle or the BOP Bottom of the Pyramid.
Equally, Rivera and Soto conclude that companies across different countries have pretty much the same reasons to decide to get assets abroad such as the search for stability, the limited domestic markets, the barriers to imports, the opportunism, and the entry of competitors that forced them to struggle in order to survive. Nevertheless, the authors conclude that it is difficult to identify a unique road to internationalization because, despite the fact that acquisitions have been a relatively common step, the sequence and speed of actions has not been the same for companies, nor consistent with what internationalization theories have proposed.
Furthermore, this authoress approaches to a definition of Multilatinas and notices that the growth and size of these firms accelerates each time more. Besides, although Cuervo-Cazurra and Liberman state that International Business Research on the Latin American region is really limited owing to the fact that studies about developing countries have normally focused on transition economies and Asian firms they recognize that each time there is an increasing interest for studying and analyzing the internationalization process of Multilatinas and the factors that have allowed their emergence.
For this reason, for Cuervo-Cazurra and Liberman , today Latin America is considered the departure point for moving forward the theory of international business. Nevertheless, these authors suggest that studies about Multilatinas' internationalization process have to move beyond Latin American firms using exports.
Internationalization, Innovation, and Productivity
Besides, Cuervo-Cazurra and Liberman do not only perceive Latin America as a research laboratory to advance the theory by identifying new issues that traditionally have been ignored but also as a fast-growing, amazing, and integrating region that is becoming a key player in the current days. This issue is consistent with the ideas of Casanova , who explains that in the current days the emerging countries are becoming economic powers owing to the fact that they are considered as the starting mechanism in order to leave behind the crisis and as a possibility to finance the economic recovery.
Furthermore, although traditionally investment flows occurred between Europe and the United States, today FDI has increased dramatically between emerging countries and developed nations. Besides, for Lourdes Casanova , the seismic change that is experiencing the world is not exclusively an economic issue. Actually, there is a current revolution in which a ''New Latin America'' has reconfigured the political, social, entrepreneurial, and environmental spheres.
In addition, today innovation is upside down owing to the fact that it is moving from emerging economies to developed nations rather than the other way around. Equally, in the current days, growth and prosperity are not exclusive of developed countries. For all these reasons, Casanova states that the term Third World Countries has become obsolete.
Besides, according to this authoress, this revolution has encouraged the emergence of Global Multilatinas. In fact, although Latin American Multinational Corporations are not a recent phenomenon, Global Multilatinas have been able to enter successfully into developed markets only in the last decades thanks to the virtuous circle in which internationalization has been perceived as a learning process to build competitive advantages. In accordance with what Casanova stated, Goldstein asserted that today some Emerging Multinational Corporations EMNCs can claim the status of Global Players due to the increasing importance that they are gaining in selected regional and national contexts.
In fact, although Third World multinationals spread out in the 70s, ''in today's global economy, multinational companies from emerging and developing economies are no longer niche players but they operate on the basis of some form of competitive advantage'' Goldstein, , p. In fact, nowadays, Northern Firms are not the only ones able to build distinctive and highly competitive characteristics. On the contrary, New Multinationals from Emerging Countries have posed challenges to companies from Developed Nations because they are more flexible to create value in turbulent environments, develop special skills for detecting business tricks, and survive in protected markets.
Finally, Goldstein stated that Latin America is acting as headquarter of internationally-oriented firms each time more. In fact, he explains the changes in the geographical patterns and the location of international business, concluding that today multinational expansion is not an exclusive phenomenon of developed economies but it is becoming an increasing trend in emerging markets. As for Santiso , he examines the changes experienced by the business environment in the last decade, which has been characterised by the appearance of new Multinational Corporations in emerging markets.
He stresses mainly the role of Brazilian and Mexican enterprises, whose precedent were Spanish companies. For this author, Multilatinas came up due to the push-and-pull factors, as well as, for the capital cost fall. Equally, Santiso emphasizes the prominence achieved by Multilatinas in the last years. For instance, he highlights the emergence of Global-scale Multilatinas. Indeed, today emerging countries' firms are becoming the new leaders of some economic sectors.
Besides, Santiso states that today emerging markets are not only seen as destinations for FDI but they have rapidly turned on investors. Furthermore, a new trend is the boom of South-South investment flows.
On their part, Dunning and Lundan have contributed to the knowledge of Multinational Corporations in a globalized environment by examining the evolution of International Business in the world economy. Finally, Ramamurti and Singh have examined and questioned which strategies and competitive advantages have allowed many firms of emerging markets to internationalise rapidly and aggressively, as well as, how their global presence is affecting other firms in developed countries.
Similarly, through their analysis, Ramamurti and Singh have sought to enrich the mainstream international business theory by studying the distinctive internationalization paths, sizes, and shapes of firms in emerging economies. Regarding Doz , Santos and Williamson , they argue that Metanationals are the firms that create value by learning from the world. Actually, ''contrary to multi-domestic or transnational firms, Metanationals access unique local knowledge in order to exploit this very uniqueness, without seeing it only as a solution to local adaptation, or as a deviation from blueprint'' Alvim et al.
In relation to the Eclectic Paradigm, Dunning states that firms engage on FDI in order to obtain OLI Ownership, Location, and Internalization Advantages which respectively constitute firm-specific competitive advantages, country-level advantages, and other benefits derived from generating assets internally rather than externally. Specifically, Dunning's ownership advantages are particular benefits specific to an enterprise, including superior advantages in quality, technology, or production; Dunning's location advantages are benefits specific to a particular country related to its geographical and political sphere; and Dunning's internalization advantages are benefits derived from producing internally to the firm.
Actually, according to Dunning , firms internalize its capital, technology, and management skills in order to have control, reduce transactional costs, avoid the disadvantages of externalization, capitalize on the market imperfections, reduce risks, and avoid uncertainty. Likewise, Dunning analyzed the nature of a country's economic involvement distinguishing two types of economic activities:.
Finally, in relation to the Eclectic Paradigm, ''based on this theory, it is expected that companies that are more internationalized achieve greater benefits from internationalization and deliver better financial performances'' Barcellos et al. As for Johanson and Vahlne , they developed the Uppsala Model 5 according to which enterprises internationalize through a learning-by-doing process following a linear-path called the establishment chain : Firms begin by exporting and as they achieve knowledge about the foreign market they are entering in, they establish sales subsidiary, followed by production facilities.
Therefore, the Uppsala Model shows the process from domestic only production and sales to foreign markets through the establishment chain , which is a linear model. Besides, Johanson and Vahlne approached to the all-encompassing term psychic distance which is the ''sum of factors preventing the flow of information from and to the market such as differences in language, education, business practices, culture, and industrial development'' Ietto-Gillies, , p. Therefore, this concept is composed by economic, administrative, cultural, and geographical elements.
Regarding the Business Network Theory , internationalization depends on the environment in which the multinational corporation operates. Therefore, multinational firms have to study the environment and adjust their organizations to better fit in it. Besides, ''in Business Network Model, the emergence of the multinational firm through foreign direct investment is a gradual process rather than a foreign market entry made once and for all'' Ietto-Gillies, , p.
Furthermore, as business relationships are important intangible assets of firms, time and resources need to be invested in order to foster them. Finally, in relation to the Portfolio Theory , Carl Iversen explained firm internationalization through international capital movements. Actually, for him, countries decide to go overseas in order to take advantage of interest rate differentials.
Actually, countries engage on firm internationalization because ''foreign investment involves higher risks than domestic investments, so lenders expect higher interest abroad than at home'' Ietto-Gillies, , p. In this way, ten Brazilian companies, eight Mexican companies, seven Chilean companies, three Argentinean companies, one Bolivian company, and one Peruvian company were analyzed.
Besides, in order to advance in the analysis, we went through three phases:. The methodology of case studies was considered the most appropriate in order to deduce which mechanisms play a determinant role in the sustainable success of some Multilatinas. Conceptual Framework Development: Base on the information collected from secondary data sources, applying Firm Internationalization Theories in order to the develop a conceptual framework that explains the common features that have fostered the insertion and emergence of top 30 Multilatinas in the world economy.
Nowadays, emerging countries from Latin America are not only destinations of foreign capital but they have also become important investors abroad due to the emergence of Multilatinas. Besides, Latin America has shown to be a stable and calm region in the last decades, with its major countries committed to reduce their debt levels and strengthen their currency reserves. Therefore, all these factors have contributed to the evolution and growth of Multilatinas around the globe.
In relation to the internationalization process Fleury et al. Actually, the characteristic Latin American political and economic context in which Multilatinas have developed contributed to their belated internationalization processes. In fact, from the 40s to the 80s, Latin American countries relied on import substitution models, high levels of regulation, and high government intervention, which protected firms from foreign and domestic competition.
As a result, Latin American companies had little pressure to improve their competitiveness and increase their efficiency. Therefore, Latin American enterprises could not become multinationals owing to the fact that the environment that prevailed until the 80s was characterized by a large domestic market, which was protected and highly influenced by the political decisions from the governments. Subsequently, from the 80s to the 90s, a process of pro-market reforms known as the Washington Consensus took place.
This was not only a macroeconomic stabilizer to the Latin American countries but it also fostered companies to improve their competitive skills and become Multilatinas. Actually, the lack of opportunities and incentives that Latin American enterprises had faced within their domestic market during the previous decades pressed them to go abroad in order to broaden their businesses and take advantage from the international markets.
Therefore, the deregulation, the pro-market reforms, and the economic openness contributed to the significant increase in FDI during the 90s owing to the fact that these trade liberalization policies changed the behavior of Latin American firms by providing them incentives to internationalize their activities. Besides, many Multilatinas advanced their internationalization processes owing to the fact that many state-owned companies were privatised.
According to the Deutsche Bank , the internationalization process of Latin America has divided in two phases. During the first stage, Multilatinas increased dramatically their exports in order to achieve a commercial expansion and then, they have followed a second stage, in which Multilatinas engaged on FDI Foreign Direct Investment in order to acquire strategic resources. Actually, most of Multilatinas did not establish overseas operations until relatively recently. Therefore, although many of these firms have been international companies owing to the fact that many of them have been exporting for a long time ago, most of Multilatinas have become multinationals enterprises until the early 90s, when they began to invest on countries abroad.
On the other hand, for Casanova and Fraser , the internationalization of Multilatinas has comprised three stages. The first stage of internationalization, which covered from to , marked the origin of Multilatinas. This phase was characterized by emerging FDI. Actually, Latin American companies engaged on limited volumes of FDI and they mainly concentrated on the search for ''natural markets'' , investing on countries which where most similar to the place of origin of the firm by expanding to countries that shared the same language and history or that were geographically closed.
For this reason, Multilatinas invested on neighbouring countries of the region and on the Latin market of United States and Spain.
Nevertheless, this phase of internationalization stopped from to because Latin America entered into the ''lost decade''. Thus, levels of FDI went down due to regional crisis. Actually, Latin American countries faced a deep shrinking of their national production, which lead to a series of regulations directed towards the liberalization and deregulation of the national markets.