Monopolistic Advantage Theory Applied to China

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Introduction

The monopolistic advantage hypothesis explains why corporations prefer to expand their operations internationally. Multinational corporations (MNCs) are often at a disadvantage compared to domestic enterprises because they must deal with liabilities associated with their foreignness, a lack of local know-how, and the high cost of gaining this information in other nations, yet they compete effectively with local companies. S. H. Hymer suggested this technique, and C. P. Kindleberger expanded on it, explaining why MNCs are so effective at competing against local enterprises. The microeconomic theory places the enterprise at the center and describes why capital and things go internationally. According to the hypothesis, corporations that employ Foreign Direct Investment as a method for internationalization tend to dominate specialized resources and competencies, giving them a degree of monopolistic power over foreign rivals. Foreign direct investors have a proprietary or monopolistic advantage over domestic enterprises. These advantages must include producing many goods at a lower cost per item, more superior technology, or a superior understanding of marketing, administration, or finance. Foreign direct investment arose due to defects in the product and factor markets. This study will conduct an article evaluation of many peer-reviewed works to understand the monopolistic advantage idea better.

Internationalization and performance: evidence from Chinese firms

The article “Internationalization and performance: evidence from Chinese enterprises” by Chao Zhou examines the internationalization–performance link using data from Chinese firms and the effect of company size on the relationship. The article quantifies internationalization by comparing foreign subsidiaries to overall subsidiaries (Zhou, 2018). Due to the absence of data on the foreign subsidiaries and total subsidiaries of Chinese A-share listed manufacturing businesses in current databases, the author compiled data on subsidiaries of Chinese A-share listed manufacturing firms using their annual financial reports from 2001 to 2014 (Zhou, 2018). The China Stock Market and Accounting Research Database collect basic accounting and market data (Zhou, 2018). Due to the article’s limited sample size of 535 manufacturing organizations, further research on unlisted Chinese enterprises or other internationalization strategies may shed more insight into the internationalization–performance relationship.

In conclusion, because this study provides new evidence for the internationalization–performance relationship using a unique longitude sample from China and a novel measure of internationalization, it emphasizes the critical role of firm characteristics in examining the internationalization–performance relationship, which may help explain previous mixed evidence. Thus, governments should assist small businesses in developing a long-term internationalization plan, providing additional assistance throughout the first and third stages of internationalization and advancing to the second and fourth stages. Additionally, policymakers should place a greater emphasis on restraining giant monopolistic corporations’ aggressive internationalization conduct.

Contextualizing international strategy by emerging market firms: A composition-based approach

Yadong Luo’s article “Contextualizing Emerging Market Firms’ International Strategy: A Composition-Based Approach” examines a composition-based logic for international expansion by emerging market firms (EMFs) — firms that leverage compositional investment, compositional competition, and compositional collaboration to achieve a unique competitive edge in global competition. The study demonstrates how EMFs creatively pursue an international strategy based on composition, allowing them to compensate for their weaknesses while capitalizing on their strengths during the global competition (Luo & Bu, 2018). They offer a competitive price-to-value ratio suited to mass international customers who are cost-conscious.

A survey of multinational firms in China was conducted to test the assumptions about how EMFs creatively pursue an international strategy based on composition. The result was that the extent and breadth of China’s external FDI had expanded dramatically over the previous decade, providing an ideal research environment for examining EMF’s distinctive development path in overseas markets (Luo & Bu, 2018). The research-validated ideas that a composition-based lens may give a fresh understanding of why and how emerging market enterprises might persist in international competition without owning conventionally characterized monopolistic advantages for some length of time.

In conclusion, this study proposes a composition-based logic for organizations that are often poor in global market power and the procession of monopolistic resources such as important technology and worldwide trademarks. While this rationale is especially well-suited for EMFs, it may be expanded and used for other economic-based multinational enterprises without similar strategic resources and influence.

Chinese multinationals’ FDI motivations: suggestion for a new theory

The article “Chinese multinationals’ FDI motivations: suggestion for a new theory” by Byung Il Park and Taewoo Roh aims to complement the conventional international business (IB) theory, the ownership, location, and internalization (OLI) perspective, which is effective at explaining the foreign direct investments (FDIs) made by developed market multinational corporations (DMNCs), and to suggest a new theoretical framework that can encompass foreign direct investments (FDIs) from Chinese multinationals. The research data comprises 206 Chinese multinational corporations (MNCs) that executed international mergers and acquisitions (IMAs) (Park & Roh, 2019). Logical regressions are used to statistically demonstrate that the learning incentive should not be omitted if the foreign direct investment (FDI) phenomena are effectively understood by including investment flows from developing (or emerging) to established nations (Park & Roh, 2019). While this work gives functional theoretical implications and suggests academic contributions, it has several drawbacks. For instance, the research focuses only on Chinese MNCs. Second, additional research must meticulously and accurately quantify learning reasons (Park & Roh, 2019). Thirdly, this research indicates that the former’s knowledge acquisition incentive sparks FDI from EMNCs to DMNCs (Park & Roh, 2019). However, the knowledge should be examined, which may be another area of study in the future.

In conclusion, to summarize, traditional IB theories, such as the OLI paradigm and internalization theory, have long tried to explain why DMNCs pursue global markets despite the existence of foreignness liabilities and have focused on their primary investment incentives. As a result, these theories do not effectively capture the primary FDI motives of EMNCs, and so are unable to grasp the FDI phenomena as its whole. Thus, there is a complement to the well-known triangle based on this concept that incorporates the knowledge-seeking drive and helps advance IB ideas.

Monopoly capitalism in the digital era

Coveri, Andrea Cozza, Claudio Guarascio, and Dario’s paper “Monopoly capitalism in the digital age” critically evaluates and adapts Monopoly Capitalism’s radical vision to the digital platform economy. Cowling and Sugden described the huge monopolistic corporation as a mechanism of planning production from a single strategic decision-making center, based on the critical concepts of Hymer and Zeitlin (Coveri et al., 2021). The research seeks to provide a paradigm in which digital platforms are seen as an evolution of influential multinational organizations. The authors attempt to apply the framework in which power and control are defined in our Monopoly Capitalism paradigm as levers for coordinating global production and influencing world societies to an Amazon case study (Coveri et al., 2021). Consequently, the authors investigate the framework on several levels, including how Amazon dominates other businesses and suppliers via diversification and direct control of data and technology. Amazon’s influence is related to global labor fragmentation and unequal bargaining leverage.

The research has shown the monopolistic position that massive digital platforms have taken in modern capitalism via the lens of the radical viewpoint advanced by Monopoly Capitalism academics. The study provided a framework for demonstrating how Hymer and Cowling’s theoretical legacy may be critical for comprehending contemporary monopolistic power in the digital platform economy (Coveri et al., 2021). Thus, prominent digital platforms should be seen as planning actors to extend influence over other players in their production and innovation networks. As a result, the latter’s wants and scopes became submissive to the demands and areas specified by the strategic decision-makers of huge organizations (Coveri et al., 2021). Additionally, the framework for examining Amazon, the latter being one of the most influential and unusual digital platforms of our day. Further, the research identifies four dimensions through which Amazon exercises its control: growth and diversification of its digital marketplace; monopolization of commodified data and leverage on technology; workforce fragmentation and surveillance; and strong bargaining power with governments.

In conclusion, a progressive approach targeted at economic and political democracy should prioritize personal data through data and platform infrastructure socialization. On the other hand, as a public good, data can be handled successfully for the benefit of society as a whole; this is because data feeds the algorithms that we all use and so are critical to enhancing the services. Although this topic extends much beyond the scope of this book, the dialectical challenge should thus be the effort to democratically manage data for the benefit of the whole society without jeopardizing the prospects for shared wealth that data may offer. As a result, the demise of modern monopoly capitalism — achieved through the socialization of data and their definition as digital global public goods — may pave the way for a renewed technological and social feasibility of democratic social planning while allowing for the emergence of new forms of democracy as well.

Three decades of export competitiveness literature: systematic review, synthesis, and future research agenda

The article “Three decades of export competitiveness literature: systematic review, synthesis, and future research agenda” by Justin Paul and Rahul Dhiman aimed at systematically analyzing the literature on export competitiveness (EC) and providing an overview of various determinants and the methodological trends in the subject field, making it possible to develop a roadmap for future researchers. The paper employed a systematic literature review (SLR) method where the authors have covered three decades of research articles published in Scopus-listed journals between 1991 and 2020 (Paul & Dhiman, 2021). The determinants of EC are synthesized, and widely used theories and methodologies are identified and classified.

Conclusion

In conclusion, to summarize, there has been no complete evaluation of the theories, background, structures, and approaches in this domain until now. As a result, this review provides both detailed insights into the subject and a unified picture of the subject field, with critical determinants such as labor and capital productivity, labor costs, exchange and real effective exchange rate (REER), domestic gross domestic product (GDP), trade liberalization, and barriers identified (Paul & Dhiman, 2021). The results indicated that EC has evolved into a scientific measure as research in this area has shifted toward quantifying EC and its factors.

References

Coveri, A., Cozza, C., & Guarascio, D. (2021). Monopoly capitalism in the digital era (No. 2021/33). LEM Working Paper Series. Web.

Luo, Y., & Bu, J. (2018). Contextualizing international strategy by emerging market firms: A composition-based approach.Journal of World Business, 53(3), 337-355. Web.

Paul, J., & Dhiman, R. (2021). Three decades of export competitiveness literature: systematic review, synthesis, and future research agenda. International Marketing Review. Web.

Park, B. I., & Roh, T. (2019). Chinese multinationals’ FDI motivations: suggestion for a new theory. International Journal of Emerging Markets. Web.

Zhou, C. (2018). Internationalization and performance: evidence from Chinese firms. Chinese Management Studies. Web.

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