LLL Model The linkage, leverage, learning (LLL) model was originated due to the critics of the OLI framework as it advocates the asset exploration motive that is a springboard perspective (Matthews, 2002). Matthew (2006) developed this model to provide pivotal understanding to the accelerated internationalization decisions of EMNEs through resource-based analysis. The first aspect is linkage, which understands how companies decide to leverage into new markets. EMNEs are viewed as latecomers hence linkage is a mechanism that provides them with ready access to internally lacked resources such as advanced technology or brand reputation through collaborative partnership with foreign firms (Luo and Tung, 2007).
Risk due to uncertainty in the market is reduced often through partnership thus it is a popular strategic decision that is utilized by Chinese EMNEs (Morck, Yeung and Zhao, 2008). The second feature, leverage, concentrates on the exploitation of linkage by channeling these resources and cost advantages to overcome barriers in order to remain internationally competitive (Matthews, 2002). Lastly, learning is a stage established when EMNEs acquire competitive advantages and dynamic capabilities through linkage and leverage strategies and attain knowledge on how to compete on international level (Matthews, 2006). He and Fallon (2013) illustrates the implementation of LLL model analysis on Tata Motors whereby through the acquisition of Jaguar Land Rover, they were able to enhance both their brand reputation and technological skills. Furthermore, they were able to leverage their knowledge to evolve into global players (He and Fallon, 2013). Therefore, the LLL model is able to furnish strategic intents of EMNEs as well as providing account for the rapid rise of EMNEs (Matthews, 2006). Hence, the theory reckoned that any EMNEs, which lack strategic resources, have the possibility to internationalized in an accelerated manner through integration of the LLL model (Matthews, 2002). Motivations of FDI As the advantages of EMNEs and traditional MNEs differ, it is imperative to analyse the EMNE’s motivation to expand internationally as investment motivations varies as accordance to the development level of recipient economies.
Resource or asset seeking motivation is a growingly vital motivation for EMNEs. It is driven by a need to obtain resources that is non-existent or at a higher comparative cost in home countries. Ramamurti (2012) states that EMNEs are searching for resources such as technological or managerial capabilities when forming partnerships. The main motive is to sustain and enhance competitive position or to impair competitors.
Makino, Lau and Yeh (2002) highlight that Taiwanese EMNEs usually chose asset seeking as their motivation by forming linkages with foreign firms, which was a key to their successive strategies for international expansion. Moreover, Sim and Pandian (2007) contend that by choosing precisely, Taiwanese firms were able to bridge the technological gap and expedite development of competences.Market seeking motivation is focused on gaining access to local markets in which products are sold in local markets but produced in the host country. It can also be termed as horizontal FDI as firms develop similar plants in a foreign market to supply local market (Weeson, 2004). EMNEs may invest in large market size in order to gain access to effective economies of scale. According to Sim and Pandian (2007), EMNEs from Malaysia expand their production lines internationally to China and India to garner better competitive edge, as their home market may be saturated or too competitive.
Dunning and Lundan (2008) state that foreign governments often imposed attractive incentives such as trade barriers to encourage more investments from EMNEs. Thomas et al. (2007) indicate that efficiency seeking motives is ventured in order to take advantage of lower cost structure for production factors. Sim and Pandian (2007) research suggests that most EMNEs invest in lower cost countries because of the increasing cost of production factors in their home countries. Thomas et al. (2007) further points out that companies were able to acquire risk diversification and economies of scale as efficiency seeking motive is seen as lowering costs from economic system and differences in factor endowment. However, in order to adopt efficiency-seeking motives, firms are required to be large, diversified and experienced (Sim and Pandian, 2007).
Many EMNEs faced failure expanding internationally due to wrong selection of motives and lack of understanding of the host country. Besides that, these motives are dependent on EMNEs’ industries and investment stage (Weeson, 2004). Besides that, the choice of location is dependent on the different motives in order to attain crucial competitive advantages (Dunning, 2006). ConclusionThis essay has utilized several theoretical frameworks to explain the internationalization process and decisions undertaken by MNEs. Firstly, it underlines the key differences such as advantages and motives between traditional multinationals and emerging market multinationals. However, this has led to different opposing views in explaining the decisions and evolution of EMNES.
The OLI framework covers macroeconomic system and explain that EMNEs should possess different advantages especially ownership advantages, as it will affect the decision of the company. However, Uppsala model argues that EMNEs internationalise in order to attain ownership advantages and it illustrates international expansion of firms in gradual incremental steps through organizational learning. On the other hand, the LLL highlights the importance of organizational learning as endorsed by Uppsala model however; it does not follow the proposed chain that is viewed as cautious. It advocates a springboard perspective to explain the accelerated internationalization process of EMNEs. From a theoretical standpoint, the discussed frameworks may.
It is evident that there is complexity in emerging multinational’s internationalization however despite the contrasting views, all frameworks has explained in their terms on how different factors can influence EMNE’s decisions to expand internationally.