Hostname: page-component-8448b6f56d-gtxcr Total loading time: 0 Render date: 2024-04-17T19:12:31.268Z Has data issue: false hasContentIssue false
  • English
  • Français

Charting Dynamic Trajectories: Multinational Enterprises in India

Published online by Cambridge University Press:  10 April 2014

Prithwiraj Choudhury  and
Tarun Khanna
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

In this article, we provide a synthesizing framework that we call the “dynamic trajectories” framework to study the evolution of multinational enterprises (MNEs) in host countries over time. We argue that a change in the policy environment in a host country presents an MNE with two sets of interrelated decisions. First, the MNE has to decide whether to enter, exit, or stay in the host country at the onset of each policy epoch; second, conditional on the first choice, it has to decide on its local responsiveness strategy at the onset of each policy epoch. India, which experienced two policy shocks—shutting down to MNEs in 1970 and then opening up again in 1991—offers an interesting laboratory to explore the “dynamic trajectories” perspective. We collect and analyze a unique dataset of all entry and exit events for Fortune 50 and FTSE 50 firms (as of 1991) in India in the period from 1858 to 2013 and, additionally, we document detailed case studies of four MNEs (that arguably represent outliers in our sample).

Type
Research Article
Information
Business History Review , Volume 88 , Issue 1: Business, Networks, and the State in India , Spring 2014 , pp. 133 - 169
Copyright
Copyright © The President and Fellows of Harvard College 2014 

References

1 Patrick Thibodeau, “In a Symbolic Shift, IBM's India Workforce Likely Exceeds U.S.,” Computerworld, 29 Nov. 2012, available at http://www.computerworld.com/s/article/9234101/In_a_symbolic_shift_IBM_s_India_workforce_likely_exceeds_U.S.; Web site accessed on 26 July 2013.

2 Roy, Tirthankar, “Trading Firms in Colonial India,” Business History Review 88 (Spring 2014)CrossRefGoogle Scholar.

3 Jones, Geoffrey, Multinationals and Global Capitalism (Oxford, 2005), ch. 10Google Scholar.

4 Tomlinson, B. R., “Foreign Private Investment in India, 1920–1950,” Modern Asian Studies (1978): 657Google Scholar, Table 1.

5 Encarnation, Dennis, Dislodging Multinationals: India's Strategy in Comparative Perspective (Ithaca, N.Y., 1989), ch. 2Google Scholar.

6 Tomlinson, B. R., “Colonial Firms and the Decline of Colonialism in Eastern India, 1914–47,” Modern Asian Studies (1981): 455–86CrossRefGoogle Scholar.

7 Wilkins, Mira, The Maturing of Multinational Enterprise: American Business Abroad from 1914–1970 (Cambridge, Mass., 1974), 59CrossRefGoogle Scholar, Table 3.4.

8 Kust, Matthew J., “Treatment of Foreign Enterprise in India,” Rutgers Law Review 17 (1962): 364, 354Google Scholar.

9 Kust, Matthew J., Foreign Enterprise in India: Laws and Policies (Chapel Hill, 1964)Google Scholar.

10 Kudaisya, Medha, The Oxford India Anthology of Business History (Oxford, 2011)Google Scholar; Nayak, Amar, Multinationals in India: FDI and Complementation Strategy in a Developing Country (New York, 2008), chs. 2, 4, and 5CrossRefGoogle Scholar; and Kumar, Nagesh, Multinational Enterprises and Industrial Organization: The Case of India (Thousand Oaks, Calif., 1994), ch. 1Google Scholar.

11 Encarnation, Dislodging Multinationals.

12 Dusanjh, Harpreet and Sidhu, A.S., “Policy Framework for Multinational Corporations in India: A Historical Perspective,” Indian Journal of Economics and Business (2010): 527–29Google Scholar.

13 Kudaisya, The Oxford India Anthology of Business History; Kumar, Multinational Enterprises and Industrial Organization.

14 Nayak, Multinationals in India.

15 Encarnation, Dislodging Multinationals.

16 Kumar, Multinational Enterprises and Industrial Organization.

17 Bernard Weinraub, “Economic Crisis Forcing Once Self-Reliant India to Seek Aid,” New York Times, 29 June 1991, available at http://www.nytimes.com/1991/06/29/world/economic-crisis-forcing-once-self-reliant-india-to-seek-aid.html; Web site accessed on 21 Oct. 2013.

18 Acemoglu, Daron and Robinson, James A., Why Nations Fail: The Origins of Power, Prosperity, and Poverty (New York, 2012)Google Scholar.

19 Central Intelligence Agency, World Factbook: India, available at https://www.cia.gov/library/publications/the-world-factbook/geos/in.html#Econ; Web site accessed on 22 July 2013.

20 BBC News, “India: The Economy,” 3 Dec. 1998, available at http://news.bbc.co.uk/2/hi/south_asia/55427.stm; Web site accessed on 22 July 2013.

21 Analysis conducted by researchers.

22 Information from Technology Information, Forecasting and Assessment Council (TIFAC).

23 Chakraborty, Chandana and Nunnenkamp, Peter, “Economic Reforms, FDI, and Economic Growth in India: A Sector Level Analysis,” World Development 36, no. 7 (2008): 1192–1212Google Scholar.

24 Wilkins, Mira and Hill, Frank Ernest, American Business Abroad: Ford on Six Continents, new ed. with new intro. by Wilkins, Mira (Cambridge, U.K., 2011), 11CrossRefGoogle Scholar.

25 For example, Tomlinson, “Foreign Private Investment in India 1920–1950”; Jones, Geoffrey, British Multinational Banking, 1830–1990: A History (Oxford, 1993)Google Scholar; Wilkins and Hill, American Business Abroad; Cox, Howard, The Global Cigarette: Origins and Evolution of British American Tobacco, 1880–1945, (Oxford, 2000), 202–37Google Scholar; Jones, Geoffrey, Entrepreneurship and Multinationals: Global Business and the Making of the Modern World (Cheltenham, 2013), ch. 8Google Scholar; van B. Cleveland, Harold and Huertas, Thomas F., Citibank, 1812–1970 (Cambridge, Mass., 1985)Google Scholar; Hidy, Ralph W. and Hidy, Muriel E., Pioneering in Big Business, 1882–1911 (New York, 1955)Google Scholar; and Larson, Henrietta M., Knowlton, Evelyn H., and Popple, Charles S., History of Standard Oil Company (New Jersey): New Horizons, 1927–1950 (New York, 1971)Google Scholar.

26 An entry in our sample indicates opening of the Indian subsidiary with a well-defined mandate to sell, manufacture, conduct R&D, etc. An exit in our sample indicates closing down of the Indian subsidiary and/or a visible shutting down of all operations in India. Coding was done by two independent research analysts and validation was done by the authors in case of disagreement between the analysts. The tables here have been condensed; please contact the authors for the full tables with data to 2013.

27 Pure R&D entry referring to an entry with the only function of the firm as R&D in India.

28 For example, Jones, Entrepreneurship and Multinationals, ch. 4.

29 Encarnation, Dislodging Multinationals, 60.

30 Theoretically, a fourth option of stay/exit is also possible since later exit might be motivated by activities in another geography.

31 Bartlett, Christopher A. and Ghoshal, Sumantra, Managing across Borders: The Transnational Solution, vol. 2 (Boston, 1999), 67Google Scholar.

32 The use of outliers in the context of India to outline differences in dynamic trajectories is similar in principle to the analysis used by Jones and Khanna where they compared the different trajectories taken by Jardines and Swire in face of Communist intervention in China. Jones, Geoffrey and Khanna, Tarun, “Bringing History (Back) into International Business,” Journal of International Business Studies 37 (2006): 453–68CrossRefGoogle Scholar.

33 Nayak, Amar, Multinationals in India: FDI and Complementation Strategy in a Developing Country (New York, 2008), chs. 2, 4, and 5Google Scholar; Vachani, Sushil, Multinationals in India: Strategic Product Choices (Columbia, Mo., 1992), 12–31Google Scholar; Fieldhouse, D. K., Unilever Overseas: The Anatomy of a Multinational, 1895–1965 (Stanford, 1978)Google Scholar.

34 Jones, Entrepreneurship and Multinationals, ch. 8. Vanaspati is vegetable ghee and Dalda is a brand.

35 “Hindustan Unilever Limited Factsheet,” available at http://www.hul.co.in/Images/HUL-Factsheet_tcm114-188694.pdf; Web site accessed on 22 July 2013.

36 Jones, Entrepreneurship and Multinationals, 178.

37 Ibid., 168.

38 Ibid., 177.

39 Encarnation, Dislodging Multinationals, 71.

40 Vinod Mahanta, “License to Lead: Hindustan Unilever's Incredible Talent Grooming Machinery,” Economic Times, 20 Apr. 2012, available at http://articles.economictimes.indiatimes.com/2012-04-20/news/31374112_1_hul-managers-hul-ceo-nitin-paranjpe-leverites; Web site accessed on 22 July 2013.

41 Hindustan Unilever Limited, “Our History,” available at http://www.hul.co.in/aboutus/ourhistory/; Web site accessed on 22 July 2013.

42 “Nitin Paranjpe of Hindustan Unilever: Remaining ‘Relevant and Contemporary’ to Indian Consumers,” Knowledge@Wharton, 21 Oct. 2010, available at http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4536; Web site accessed on 26 July 2013.

43 Hindustan Unilever Limited, “Introduction to HUL,” http://www.hul.co.in/aboutus/introductiontohul/; Web site accessed on 22 and 24 July 2013.

44 Ibid.

45 Cox, Howard, “Growth and Ownership in the International Tobacco Industry: BAT, 1902–27,” Business History 31, no. 1 (1989)Google Scholar.

46 Cox, “Growth and Ownership in the International Tobacco Industry”; Cox, Howard, “The Global Cigarette: Origins and Evolution of British American Tobacco, 1880–1945,” in BAT in India (Oxford, 2000), 202–37Google Scholar; and Nayak, Multinationals in India.

47 Cox, “The Global Cigarette.”

48 Ibid.

49 Nayak, Multinationals in India.

50 Encarnation, Dislodging Multinationals, 69–70.

51 ITC, “History and Evolution,” available at http://www.itcportal.com/about-itc/profile/history-and-evolution.aspx; Web site accessed on 26 July 2013.

52 Wilkins, The Maturing of Multinational Enterprise; Giebelhaus, August W., “The Pause that Refreshed the World: The Evolution of Coca-Cola's Global Marketing Strategy,” in Adding Value: Brands and Marketing in Food and Drink, ed. Jones, Geoffrey and Morgan, Nicholas J. (London, 1994)Google Scholar.

53 “Coca-Cola and Pepsi in Indian Market,” CoolAvenues.com, 27 May 2010, available at http://www.coolavenues.com/marketing-zone/coca-cola-and-pepsi-in-indian-market?page=0,1; Web site accessed on 26 July 2013.

54 Negandhi, Anant R. and Palia, Aspy P., “The Changing Multinational Corporation: A Nation State's Relationship—The Case of IBM in India,” Asia-Pacific Journal of Management 6, no. 1 (1988): 15–38Google Scholar.

55 Dinesh C. Sharma, “Rise, Fall and Rise of IBM in India,” Business Today, 17 June 2011, available at http://businesstoday.intoday.in/story/ibm-india-george-fernandes-history-in-india/1/16367.html; Web site accessed on 26 July 2013.

56 IBM, “IBM India Milestones,” available at http://www-07.ibm.com/in/careers/history.html; Web site accessed on 26 July 2013.

57 “Tata Pulls Out of IBM Indian Joint Venture,” Computer Business Review, 03 June 1999, available at http://www.cbronline.com/news/tata_pulls_out_of_ibm_indian_joint_venture; Web site accessed on 26 July 2013.

58 Prasenjit Bhattacharya and Sanjeev Sharma, “IBM Paid $31mn for PwC India,” Economic Times, 26 Mar. 2003, available at http://articles.economictimes.indiatimes.com/2003-03-26/news/27550412_1_pwc-india-ibm-shares-samuel-palmisano; Web site accessed on 26 July 2013.

59 Vernon, Raymond, “Sovereignty at Bay: The Multinational Spread of U.S. Enterprises,” International Executive 13, no. 4 (1971): 1–3Google Scholar; Caves, Richard E., “Research on International Business: Problems and Prospects,” Journal of International Business Studies 29, no. 1 (1998): 5–19Google Scholar; Barnet, Richard J. and Müller, Ronald E., Global Reach: The Power of the Multinational Corporations (New York, 1974)Google Scholar; Bartlett and Ghoshal, Managing across Borders; Encarnation, Dislodging Multinationals.

60 Teece, David J., Pisano, Gary, and Shuen, Amy, “Dynamic Capabilities and Strategic Management,” Strategic Management Journal 18, no. 7 (1997): 509–33Google Scholar.

61 Our focus on contrasting Anglo-Dutch/British and American multinationals in India is in the spirit of prior work by business historians in the context of India. Mira Wilkins provides an interesting narrative of how British and American multinationals had conflicting strategies in India in the late 1920s. In 1929, American & Foreign Power acquired a 50 percent stake in the Tata Hydroelectric Agencies Ltd. of Bombay and tried to make an investment in the Calcutta Electric Supply Corporation, “a move that was blocked by British opposition”; Wilkins, The Maturing of Multinational Enterprise, 134. In 1947, following India's independence and following pressure from the Indian government, “American & Foreign Power Company relinquished control of its Indian properties” (p. 302).

62 We conducted very preliminary analysis using stock prices for Hindustan Unilever in India. This analysis indicates that while both HUL and the parent Unilever outperformed their relative stock market indices from 1990 to 2013, HUL disproportionately outperformed the parent Unilever on that measure from 1993 to 2007. This indicates that the Unilever India strategy of stay/stay was paying rich dividends for the firm, even compared to the performance of the global parent.

63 Wilkins, The Maturing of Multinational Enterprise, 417–21.

64 Ibid., 439.

65 Jones, Multinationals and Global Capitalism, 283.

66 Dunning, John H. and Lundan, Sarianna M., Multinational Enterprises and the Global Economy, 2nd ed. (Cheltenham, 2008)Google Scholar.