week 5 Flashcards
(16 cards)
What are emerging markets?
Economies with low to middle income, high growth potential, undergoing institutional change and integrating into global markets (e.g., China, India).
What are defining features of emerging markets?
*Weak formal institutions
*High state involvement
*Informal networks
*Infrastructure gaps
*High risk and uncertainty
How are emerging markets defined by scholars?
*Kvint (2009): Societies transitioning to free-market economies with increasing freedom
*Vercueil (2012): Intermediate income with catch-up growth and global integration
What are institutional voids?
Gaps in governance mechanisms, laws, or market infrastructure that hinder efficient market transactions (Khanna & Palepu, 1997).
What is institutional distance?
The difference in institutional environments between home and host countries, which affects multinational strategy and adaptation.
What are implications for firms operating in emerging markets?
*Need to navigate rapid institutional change
*Rely on informal institutions and relationships
*Adapt business models to local conditions
Can emerging market institutions converge with those of advanced economies?
*Unlikely due to path dependence
*Institutional frameworks remain distinct
What is the role of emerging market MNEs in institutional change?
*Can drive pro-market reforms
*May create informal institutions (e.g., Alibaba, BYD)
What are characteristics of Chinese capitalism?
*State-permeated, authoritarian context
*SOEs dominate strategic sectors
*Private firms use informal financing (e.g., family, friends)
*Strong government direction
How do Chinese capital markets operate?
*Bank-led system
*Limited access for private firms
*Preferential access for SOEs
*Informal networks supplement funding
How does corporate governance function in China?
*Opaque ownership structures
*State influences governance of SOEs
*Private firms often controlled by founders or families
What are intra-firm relations like in China?
*Centralised decision-making
*Weak internal trust
*Fragmented employment relations (short-term contracts)
What role does education and training play in China?
*Emphasis on general skills
*Limited vocational training
*Increasing emphasis on R&D and innovation
What is guanxi?
A system of social networks and influential relationships facilitating business and resource exchange in China.
How has Alibaba overcome institutional voids?
*Created Alipay for online payments
*Built own logistics (Cainiao)
*Developed ecosystems supporting its platform model
What makes BYD a unique case in China?
*Developed EV technology despite weak R&D environment
*Hired engineering talent and reverse-engineered foreign technology
*Benefited from industrial policy support
