Firms looking to expand globally need to ensure that their organizational resources are adaptable to new markets. Getty Images

When foreigners invest in emerging markets, the prospect for those markets' local businesses looks bright. The payoffs for a country's companies can range from injections of foreign capital to better managerial talent, technological sophistication and international know-how. But does foreign investment ever push local firms to venture into international projects of their own?

Rice Business professor Haiyang Li looked closely at the ripple effects of foreign investments, and concluded it all depends on the local businesses' adaptability. That — and their appetite for risk.

Together with Xiwei Yi of Peking University and Geng Cui of Lingan University, Hong Kong, Li launched a large-scale study of Chinese manufacturers to better understand how multinational investment in domestic companies influences the global market.

The subject was ripe for analysis. Over the past decade, more and more companies in China and other emerging markets have been testing the waters of direct investment in other countries in sectors as varied as food and beverages, apparel, electronics and transportation equipment.

Li's team hypothesized that these emerging market companies were leveraging benefits that foreign investment had ferried into their home markets. This investment, the researchers theorized, had brought in useful resources and skills, which helped ease the local companies into international business markets.

To confirm this, the team needed to test whether the converse was true: Might information gained from foreign investors actually dull a local firm's interest in branching out overseas? Maybe the risks of that type of venture — which are higher for firms in emerging markets — would seem too stark.

To find out, the researchers first vetted the literature on inward and outward investment activities. How, they wanted to know, did domestic firms interact with foreign players in the technology or product importing process? In equipment manufacturing? In franchising and licensing, mergers and acquisitions and activities such as setting up subsidiaries?

Working with a global research company, Li and his colleagues next surveyed 1,500 Chinese businesses in the food, clothing, electronics and vehicle industries. (Firms in finance, banking, natural resources and business services were ruled out because of their government ties, and also because such organizations usually use fewer resources, which made them harder to evaluate.)

Each company that took part in the survey rated how much they engaged with foreign investors in activities such as importing products and services or forming joint ventures. They also indicated if dealing with foreign direct investment had brought them foreign capital, advanced manufacturing know-how, managerial experience or competitive insight into overseas business.

The researchers also measured the "fungibility" of these firms' resources — in other words, how easily could their organizational, cultural and technological resources be adapted to various geographical settings?

Finally, managers rated how risk-prone they thought their firms were.

After Li and his coauthors processed the answers, they found several links between foreign investment in domestic firms and local companies' internationalization efforts.

First, there was a positive relationship between the local gains from foreign investment and a firm's interest in internationalization projects. While this effect was indirect, it was amplified when foreign investment gave a firm new capabilities that made it more adaptable. In other words, the Chinese companies whose contact with foreign multinationals made them more adaptable in general were better positioned to prosper in ventures abroad.

This stands to reason, the researchers note. That's because by its very nature foreign investment sparks awareness of new opportunities: every business trip, plant visit or negotiation with foreign partners is a hands-on lesson in international trade.

But the researchers also uncovered a significant downside to foreign investment for local Chinese firms. When a project was considered high-risk, such as a merger or establishment of a wholly owned subsidiary, the local firms were less prone to venture abroad. This adverse effect was worse for firms that labeled themselves risk-averse, probably because exposure to foreign investors only made the risks of internationalizing clearer.

These findings add important detail to the way foreign investment can affect their local partners' own international plans — for good and ill. Already, businesses in emerging markets are used to optimizing resources, wrangling diverse idioms and artisans and adapting logistically to get their products to market. That nimbleness, Li and his colleagues propose, should also be seen as a globalization tool. For businesses in emerging markets, the researchers conclude, day-to-day technical ability is actually less important than cultural and organizational flexibility — and applying lessons learned from foreign investors to their own projects abroad.

In other words, for firms in emerging markets, globalization is not just a path to new markets. It's a way to study interactions with foreign firms while on their home turf – and learn how to apply those lessons abroad.

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This story originally ran on Rice Business Wisdom.

Haiyang Li is Area Coordinator and Professor of Strategic Management at Jones Graduate School of Business at Rice University.

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New innovative dining club connects Houston young professionals to deals

Join the club

Houstonians love to dine out. And they love being part of something, especially if it's something that gives them something. Houstonians, meet EaterPass.

It's the brainchild of Courtney Steinfeld, who describes it as "a hip, fun, local membership community." While her target audience is millennial young women, ages 24-34, membership is open to all. For an $8 monthly fee, EaterPass members get "Insider Pricing" at a host of participating restaurants, which translates to 20 percent off the total bill, including drinks.

"The Insider Pricing is available any time with the exception of happy hour or special events," said Steinfeld. "And we also offer Insider Perks. These are time-specific perks with even more value than 20 percent off. The best part is, members can choose Insider Pricing or Perks.

Some of the current perks include EaterPass members receiving happy hour pricing on drinks any time they visit the Original Ninfa's Uptown, or getting $5 pricing on a Field and Tides burger, a dozen oysters, draft beer or house Champagne at Field and Tides.

EaterPass is a month-to-month membership, and Steinfeld estimates that if members spend $40 at a partner restaurant, the membership essentially pays for itself.

She's curated a list of some of Houston's top restaurants, including BCK Kitchen, Blackbird Izakaya, Brennan's Houston, Bungalow Heights, Field & Tides, Helen Greek Heights, Helen Greek Rice Village, Kanaloa, Moxie's, the Original Ninfa's Uptown, On the Kirb, Poitin, Sweet Paris Highland Village, Shun, Tikila's, and Wicklow Heights. Also new to the mix are 8th Wonder Brewery, 8th Wonder Distillery, and La Grange.

Those who want to join can pay their membership fee online and get instructions on how to download the electronic membership card, which they show when they dine at participating restaurants.

"Our Partner list serves as an easy go-to guide," said Steinfeld. "So, we have to be choosy about who we invite in. My focus has been to grow the bar segment with recent additions such as Tikila's and La Grange, which will be available in early March. Now I am shifting back to expanding our food offerings. Barbecue and Italian options are my next focus."

Occasionally, Steinfeld says, EaterPass will host meetups at its partner restaurants, but the majority of the community's social engagement happens on Instagram.

"Members can find our latest news posted via our Instagram Stories," said Steinfeld, who also uses the platform for share news with members about announcements, gift card giveaways, and member features and tips.

Steinfeld has been passionate about growing the business and ensuring good food and drink fits for her clients.

She's also got a special one-month free deal for CultureMap readers. Use code VIP20 to sign up.

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This article originally ran on CultureMap.

Houstonians rev engines and fulfill fantasies at private racetrack

In the Driver's Seat

An enthusiastic crowd packed Life HTX event center on February 20 to celebrate a new era for Motor Speedway Resort (MSR), the 383-acre private racetrack for motor enthusiasts.

Ever wanted to drive a car with no speed limit, or find a safe, secure garage for your exotic vehicle? How about just have a second-home escape where you can connect with other motor enthusiasts? MSR, located 35 minutes from downtown Houston, is a rare personal playground that combines fantasy, freedom, and play.

At the event, the buzz was palpable. Developers Fabio Covarrubias and Gabriel Haddad announced an exciting new vision to add luxury garage villas, car showrooms, a new health spa, and high-end garages.

Guests browsed dozens of exotic cars, including the only Tramontana supercar in America. Also featured were several Ducati bikes, Lamborghinis, Ferraris, and more. Master of ceremonies John Granato, a radio show host on ESPN 97.5FM, fired up guests with a description and pictures of MSR's exciting future.

"For over 14 years, MSR has been a James Bond fantasyland, uniting motorsport enthusiasts," he said. "It was created as a place where you can drive as fast as you want, laws — and common sense — be damned. It's an exciting destination to bring your dream car for a spin."

And the new plans stirred the fervor. The development includes 800 luxury garages, 10 showrooms, and 245 single-family lots. Granato announced that the first showroom "will be signed today by Carlos Lascale from V1 Moto Ducati."

And motor enthusiasts need not leave their families behind, as the plans will include a state-of-the-art spa with a beautiful pool, workout center, and health treatments.

MSR is a dream for motorists of all types. The track welcomes amateurs who race for fun, professionals who use the track for training, collectors who like a place to show off their cars, and families that can use the facilities to practice and play together.

Just as we know many communities built around golf courses, MSR will become the ultimate community for motor enthusiasts.

A glimpse at the luxury garage villa's interior. Rendering courtesy of Motor Speedway Resort