Internationalization of Asian Multinational Enterprises

Inter terra stanchaalization of Asian world(prenominal) EnterprisesINTRODUCTION priming supranationalization can be delimitate as the desire to be a member of the transnational society by satisfying a certain standard, or strengthening the becharm of a nation on new(prenominal) nations. It becomes the transition where remoteist seeprise (MNE) engaging, it is very(prenominal) important for these companies to penet deem international grocery if they want to be accepted and tolerate successful. (Sreenivasan Jayashree and Sahal Ali Al-Marwai). The internationalisation butt on helps MNEs in maturate their operation in abroad commercialise and enhance their private-enterprise(a) position abroad. gibe to Hedman (1993), tierce briny alternatives for distributing the enterprises product exist, that is, con takeative merchandise, deal exporting and alternatives to export. When distributing in use uply, the diametrical dissemination activities atomic play 18 assi gned to 1 or several in considerationediaries in the home market. When distributing exactly, the producer itself channelizes the distribution activities, much(prenominal) as distribution to a international importer, which in his mo forward the products to an separatewise intermediary or the end customer. (Molnar, 1990) the third alternative, alternatives to export, can instruct keister by means of and through and through, for instance, have got production in the target nation, or licensing (Hedman, 1993).The fast changes in todays melody world c entirely for raw(a) ensamples of internationalisation (Fillis, 2001 Meyer and Gelbuda, 2006), oddly to be commensurate to capture the earlier phase of internationalization in a better port than the tralatitious manikins (Johanson and Vahlne, 2003). In contemporary look into, Coviello and McAuley (1999), in line with Leonidou and Katsikeas (1996), have pointed at thirdsome scheme directions that ar preferable fo r examine internationalization, namely unlike beat aim enthronement (FDI)-theories (a.k.a., the surmise of the Multinational Firm), layer computer simulations and Ne dickensrk theory. Even though these argon diverse theory directions, they be seen to be completing views where a combination of views is preferred since it is challenging to capture the internationalization concept using only ane theoretical textile (Bell et al., 2003 Bjrkman and Forsgren, 2000 Coviello and Munro, 1997 Meyer and Skak, 2002). Network theory is increasingly universe combined with coif theory in purchase golf-club to understand and explain the rapid internationalization of the sign (in Bell et al., 2003 Johanson and Vahlne, 1990, 2003 Meyer and Skak, 2002).The process of internationalization has been the give in of widespread theoretical and empirical seek (for example, Johanson and Wiedersheim-Paul 1975 Johanson and Vahlne 1977 Bilkey 1978 Cavusgil 1980 Turnbull 1987 Welch and Lousta rinen 1988) and finds a oecumenic acceptance in the books (Bradley 1991 Buckley and Ghauri 1993 Leonidou and Katsikeas 1996). The internationalization process is described as a dull railment taking place in decided salutes (Melin 1992).Internationalization processes in emergent markets, as in international markets in general, take place in a stepwise manner (Jansson, 2007). Companies overstretch themselves through a gradual viewing process. Learning is additive and takes place by doing. Firms learn just virtually doing railway line abroad, for example, teaching almost the conditions in particular markets. Companies execute prime(prenominal) to establish themselves in geographically and culturally proximate markets and outgrowth their loyalty, starting with agents, and passing through sales companies to manufacturing companies (Johanson and Vahlne, 1977 Johanson and Wiedersheim-Paul, 1975).Within the last decades, the employment world has changed drastically throu gh globalization and internationalization creating a new and fierce demarcation surround for companies. We can now see a third brandish of internationalization of inviolables in which companies domiciled in get on Western markets establish themselves on a large home base in emerging markets such(prenominal)(prenominal) as Central and Eastern Europe (CEE), Russia, China and India (Jansson, 2007).A juvenile phenomena of firm from Asian capital trade countries were internationalizing and multinationalizing their backing activities and have emerged or argon emerging as Asian multinational enterprises (World Bank, 1993). They started the internationalizing activities and investing and mise en scene up operation in other countries since mid-1980. question engage which focus on these Asian enterprises and their direct investment activities arise in recent years (Ting, 1985 Ulagado et al., 1994 Yeung 1994, 1997). Foreign direct investment (FDI) started on the early 1980s. Accord ing to studies done by Lall, 1983Well, 1983 Kumar and McLeod, 1981 Khan, 1986 Monkiewicz, 1986 Aggarwal and Agmon,1990 Tolentino, 1993, FDI of triad World multinational enterprises (TWMNEs), slightly different with the traditional MNEs from the Hesperian true countries in term of their characteristic. The growth of East Asia (World Bank, 1993) in late 1980 and early 1990, has increased intra-regional direct investment. The directed investment process from Japan , followed by Korea, mainland China, Hong Kong and capital of Sin hatchwayore and the activities transferring from one level of economies to another in Malaysia, Indonesia and Thailand has been depicted as wild flying geese flesh. (Toh and Low,1994 Guisinger, 1991). As a result, these Asian capital exporting countries firm internationalizing and multinationalizing their business activities and have emerged or be emerging as Asian multinational enterprises (World Bank, 1993).Problem taleDuring these extremely competitiv e times, the international business environment is one that is normally full of immense distrust, excitableness as well as a high rate of failure when it comes to international expansion The explore on the reputation, organization and trading operations of these emerging Asian international and multinational enterprises are limited. This is because look into in international business and calling has been dependent largely upon economic expertic and Hesperian-centric theories exceedingly- genuine predominantly in industrial and institutional economics (Buckley and Casson, 1985 Dunning, 1988, 1993). A study shown internationalization is the crucial component for a firm to grow and develop economically and scientificly (Syed Zamberi Ahmad and Fariza Hashim, 2007). Hence, it is very important for multinational companies to subscribe to a comprehensive examination of the assorted important factors that could influence the grapheme of dodge that is to be selected for internat ional market entrance.1.3 ObjectivesThis look into is dedicated to all topical anaesthetic Malayan companies who are looking at slipway and representation to internationalize their operations to a unconnected market and would be of tremendous assistance to them in determining the correct strategic agency and improve the understanding of the Asian MNEs characteristic.1.4 Research QuestionAccording to the problem statement above, the author has theorise some question to meet the enquiry objective. The questions areWhat are the key characteristics and success of their exotic ventures?What are the motives for internationalization?What are the entry strategies?What are the strategic advantages and traits?Research ContributionGovernment Through this study, authorities can carry out some organisation constitution to lead more(prenominal)(prenominal) firm success in their international proses in expanding their business.Firms This study delivers in determineation to provid e better understand characteristic and strategy for the purpose of internationalization which can increase the net internet of the firm.Economic This study change economist to better understand how emergence of economic on a rustic can help MNEs in their internationalization process.1.6 stockyThis study proposal consists 3 chapters. Chapter 1 provides the overview of the recent phenomena of internationalization, the problem statement, objectives, and question. Chapter 2 displays literature review by past query, followed by concept and theories, and enquiry framework. Chapter 3 describes the research methodology, sampling technique, selective information collection, selective information compendium and research planning that use to analysis the finding in Chapter 4.CHAPTER 2 writings REVIEW2.1 IntroductionThis chapter reviews the past studies about the concept and theory which included internationalization process, entry notes and process, eclecticist exposition, conflicting direct investment, regional and global internationalization processes, Uppsala wayl and Asian context. After that it follows by the research framework.2.2 Concept and Theory2.2.1 Internationalization processesInternationalization processes in emerging markets, as in international markets in general, take place in a stepwise manner (Jansson, 2007). Companies commit themselves through a gradual learning process. Learning is incremental and takes place by doing. Firms learn about doing business abroad, for example, learning about the conditions in particular markets. Companies tend first to establish themselves in geographically and culturally proximate markets and increase their commitment, starting with agents, and passing through sales companies to manufacturing companies (Johanson and Vahlne, 1977 Johanson and Wiedersheim-Paul, 1975). Research on the exports of principally North American companies has reached comparable results (Bilkey, 1978 Cavusgil, 1980 Czinkota, 1982 Reid, 1981). Such process theories are highly useful especially when studying international 66 H. Jansson, S. Sandberg / ledger of International Management 14 (2008) 6577 business in CEE. Learning processes are inborn since the company needs to adapt to an emerging and different business context, such as exists in the CEE (Meyer and Gelbuda, 2006).As noted by Sharma and Blomstermo (2003b) a basic assumption in internationalization process theory is that acquaintance accumulation is continuous and dependent upon the duration of impertinent operations. The womb-to-tomb firms have been seed in international operations, the more familiarity they accumulate about such operations. in that location is a relationship among familiarity accumulation and risk so that the more familiarity a firm has, the less uncertain they compass the immaterial market to be. Firms that lack knowledge about foreign markets even tend to over bode risks. This corresponds to what Jansson (1989) show co ncerning establishment processes in a regional vista, namely that the whole tone of investments in Southeast Asian countries accelerated, the more puzzled the firms became in an area. Johanson and Vahlne (1990) stated that Uppsala mannerl of internationalization indicated firms divulge an evolutionary process in internationalizing through a series of evolutionary stage.2.2.2 Entry nodes and entry processesFirms enter emerging markets face several barriers gibe to Meyer (2001). These barriers include a lack of information, unclear regulations and corruption. According to traditional research on internationalization processes, market entries either take place through intermediaries such as agents or distributors or through a firms own representative in the exporting/importing country, mainly a adjunct.In terms of research in this area, scholars have found that relationships are at the stub of the internationalization process (Axelsson and Johanson, 1992 Ford, 2002 Hkansson, 1 982 Hkansson and Snehota, 1995 Hammarkvist et al., 1982 Jansson, 1994, 2007 Johanson and Vahlne, 2003 Majkgrd and Sharma, 1998).According to the network near to internationalization, entries into local market networks take place through establishing relationships. The international marketing and purchasing of products and know-how through a direct exporter/importer network means that a erect network in the exporting region (e.g. a suppliers supplier network) is indirectly connected to another vertical network in the importing region (e.g. a buyers buyer network). This large vertical network will, in turn, be imbed in other regional and national networks, such as a financial network (Jansson, 2006, 2007).From a network positioning, establishment points in foreign market networks are defined as entry nodes. in that respect are various routes into these networks, or nodes by which a firm can enter a network. Entries through trade either take place H. Jansson, S. Sandberg / Journ al of International Management 14 (2008) 6577 67 directly with customers or indirectly through intermediaries. Direct relationships, dyads, can be established mingled with buyer and seller in the respective countries. Indirect relationships, triads, involve an outside party or other type of entry node, usually an intermediary such as an agent, dealer or distributor. Dyads can alike be established through the entry mode FDI (a foot soldier in the importing country).Entry processes take place by building relationships to form networks in foreign markets. Irrespective of entry node, the development of international buyer/seller relationships tends to follow a five stage pattern (Ford, 1980, 2002 Ford et al., 1998). Each stage of the entry process can be described by a number of relationship factors, such as how the experience, commitment and adaptations of the parties increase crossways the stages and how the distance and uncertainty in the midst of them are reduced across the sta ges.The first stage includes the taking-up of marketing/purchasing activities before a formal relationship begins. The next three stages show how direct buyerseller relationships within networks are established from their beginning and to their deepening. Experience indicates the substance of experience the respective parties have with each other. They will forecast their partners commitment to the relationship, e.g. by the willingness to make adaptations. place is multifaceted and it can be split into social, cultural, technological, time and geographic distance. Uncertainty deals with the fact that at the sign stages, it is knotty to assess the potential rewards and be of the relationship. In the one-fifth and final stage, the relationship is extensively institutionalize and habitual, with commitment being taken for granted.Based on Terpstra and Sarathy, 1991 and Baek, 2003, reciprocal ventures with master of ceremonies political relations and local partners in the ph alanx country were among the preferred entry strategies for international operational operation. Petronas in South Africa entered into a commercial partnership with Engen in 1996 as a strategic partner. The acquisition was to enable both companies to implement a share growth strategy in Africa and the Indian Ocean Rim, slice allowing the development of potential operational synergies between the two business entities (Padayachee and Valodia, 2002).2.2.3 Eclectic ExplanationEclectic persona is a proverbial known explanation of international production.Dunnings (1977, 1988, 1993, 1995). Eclectic Paradigm stated that the extent and pattern of international production is determined by1) Ownership advantages (for example, proprietary engineering, products, expertise and skill)2) Internalization advantages (for example, transaction costs reduction, maximize economic return), and3) Location advantages of host and home countriesThese OLI (Ownership Location Internalization) variables li sted above explain the reason internationalization occurs but overlook the dynamic process of internationalization. The Eclectic paradigm is provided by the Investment Development room (Dunning, 1981, 1986) with a dynamic dimension, and relates the net superficial investment of a country to its stage of economic development. flipper stages of IDP ( Investment Development Path) percentage point 1 At low level of economic development, in that respect is little inward or outerss investments.Stage 2 Inward investment becomes attractive, especially in import substitution projects as the country develops. Some external investment may take place in neighborly countries which at move stages of development. Most development countries with some outward investments are at this stage.Stage 3 With economic development move forward, net inward investment declines while outward investment increases (relative to inward investment). Increasing of outward investment may take place in count ries at lower IDP stages in order to overcome cost disadvantages in labour intensive industries and likewise to seek markets or strategic assets. Singapore, Taiwan and South Korea are said to be at this stage.Stage 4 As production being multinationalized, net outward investment becomes positive. Most developed countries are at this stage.Stage 5 The lean from advantages found more on factor endownment to those found on internalizing international market convergent outward and inward investment flows.Empirical research on Third World (including Asian) multinationals has given general throw to the IDP concept (Dunning, 1986 Tolentino, 1993 Dunning Narula, 1996 Lall, 1996). Dunning and Narula (1996) acknowledge that country factors may influence the IDP pattern of a country, such as resource endownment, home market size, industrialization strategy, government policy, and the organization of economic activities. TWMNEs were little than their counterparts from developed countries a nd have limited number of a handle operations. The competitive advantages of TWMNEs were based on cost advantages (particularly labour cost) and great responsiveness to host country needs which is different from horse opera MNEs. They served market niches which were not covered by the traditional MNEs and so were not in direct competitor with them. The major motivation for these FDI was protecting export markets rather than exploiting rent from proprietary technological know-how (or other self-control specific advantages characteristic of western MNEs) explained in theories, such as the eclectic paradigm of Dunning (1977, 1995). TWMNEs possessed first or second generation labor-intensive technologies and produced standardized products mainly for the domestic host country market which at stage 4 of IDP. surface (1983) presupposes a pecking order hypothesis to suggest that the TWMNEs technologies could fill the technological gap between the groundbreaking technology of develope d country MNEs and the rudimentary technology of less developed countries (LDCs) in a pecking down order. Lall (1983) accentuate the flexibility and adaptability of TWMNEs technologies to be more suitable or remove to LDC situations.2.2.4 Foreign Direct Investment (FDI)It may seem surprising that in that respect is significant number of foreign direct investments by some firms from ontogeny countries because it is usually credited to more developed countries. A number of studies indicate that FDI flows not only from the industrialize or well-developed countries, as well as development countries. Scholars such as Lecraw (1981, 1993), Wells (1977, 1981), Lall (1983a, and 1983b), Kumar and Lim (1984), Ulgado et. al., (1994) are only some of those who have carried out empirical studies and researched FDI flows from evolution country firms in the 1970s and 1980s. Comparisons between the nature of international expansion of firms from growth countries and the nature of those corp orations that originated from developed countries are made in most of these studies (Dunning, 1986 Vernon-Wortzel and Wortzel, 1988). In general, it has been depicted that the competitive advantages of MNCs from developed country are derived from advanced proprietary technology or other superior resources (Yeung, 1994). While ability to reduce costs of import technology through de-scaled manufacturing or smaller scale of production is focus of the competitive advantage from developing country MNCs were derived from their This is a process whereby technologies from industrialised countries are adapted to suit smaller markets by reducing scale, replacing machinery with manual labour, and relying on local inputs (Ramamurti, 2004).Outward direct investment from developing countries started to grow apace to a sizeable magnitude during the mid-1980. This became the main tool of developing country multinationals in demanding that their constituent firms relieve oneself for the drastical ly international competition that they were about to face(Kumar, 1996, 1997). The emergence of new technologies in the late 1980s in some manner decreases the interest in outward direct investment from developing countries subsided (Kumar, 1996 Oh et. al., 1998 Pananond and Zeithaml, 1998 van Hoesel, 1999). Pananond and Zeithaml(1998) and van Hoesel(1999) recounted that aggregate analyses of developing country MNEs conducted at the industry level get attention from scholars and yielded interesting results by the early 1990s. They reason out that there were marked differences in characteristics between developing country MNEs in the 1980s and 1990s. Scholars posited that these two groups of MNEs belonged to two different waves of development in term of their respective historical backgrounds, nature of businesses, extent of the employment of government in operations and transactions, geographical direction, and mode of internationalisation activity. MNEs in the 1980s are more rel ate with cost competitiveness with their competitors (van Hoesel, 1999). In contrast, developing country MNEs in the 1990s placed greater tenseness on the development and reset business strategies due to the dynamic changing patterns of world business twist brought about by trade rest and economic globalisation (Dunning et al., 1997). Besides this, they put more driving on technological competence as the source of competitive advantage (Pananond and Zeithmal, 1998). They noted that notwithstanding these differences, there existed several significant inter cogitate points of intersection point between the two groups (Dunning et al., 1997 van Hoesel, 1999).2.1.5 Regional and global internationalization processesIn analyzing the early internationalization go of smaller and less experienced companies, the internationalization process model by Johanson and Vahlne (1977) is regarded as a highly useful tool. In internationalization research, fewer studies have been conducted on hig her(prenominal) level internationalization where companies are established in several countries and have fully-owned businesses (Meyer and Gelbuda, 2006). The more countries in a region a firm exports to, the more extensive is the regional internationalization process. The more regions a firm exports to, the more global is the internationalization process.New stages of internationalization are established when a firm extends its business from one major type of market to another or from one type of foreign environment to another. The main factor pot these stages is experiential knowledge, meaning that firms gradually build a knowledge base through operating in foreign markets. They learn from past experience by transforming this experience to useful knowledge. There are three types of such knowledge (Eriksson et al., 1997). Internationalization knowledge about how to commit international operations is an expression of a firms current stock of knowledge in the form of its resources and capabilities. The more novel the foreign environment, the more difficult it is for the firm to apply its current stock of knowledge to that foreign market. This means that there is a gap between a firms present internationalization knowledge and the knowledge the company has about how to do business in the specific foreign market, i.e. concerning its network experiential knowledge and institutional knowledge (Blomstermo et al., 2004).Based on a firms experiential knowledge process, internationalization processes are very untold split into different degrees of internationalization. Johanson and Mattsson (1991) discuss the internationalization process for firms with various degrees of internationalization and propose that the process is mainly valid during the early stages of a firms internationalization inexperienced firms tend to follow a traditionally let up and gradual pattern, while the internationalization of a more experienced company is less slow and gradual.2.2.6 Upps ala modelThe Uppsala model (Johanson Weidersheim-Paul, 1975 Johanson Vahlne, 1977) provides an explanation of the dynamic process of internationalization of individual firms. The Uppsala model emphasize on the impressiveness of gaining knowledge and experience about the characteristics of foreign markets along the internationalisation path, and helps MNEs reduced risks and levels of uncertainty in strange foreign environments before investing (Wiedersheim-Paul et al., 1978).The nonparallel steps of increasing highly commitment are based on knowledge acquisition. Foreign activities started with export to foreign country through independent representative or agent, after that establish sales subsidiary and finally start production in the host country. The internationalization of the firm across many foreign markets was particularly related to psychic distance which included differences in language, education, business practices, culture and industrial development. Firstly, enter foreign market which closer in term of psychic distance, followed by subsequent entries in markets with greater psychic distances. Same goes to entry mode of foreign market. The incremental expansion of market commitment meant that the sign entry was typically some form of low commitment mode and followed by progressively higher levels of commitment. Obviously, commitment of the level of ownership in different markets was match with their psychic distance. The Uppsala model had received general support in empirical research (Welch and Loustarinen, 1988 Davidson, 1980, 1983 Erramilli et al., 1999) and its largely spontaneous nature and evolutionary learning perspective made it attractive as an explanatory model.A related view regards learning was that TWMNEs built up their advantages through the accumulation of technology and skills. Lall (1983) emphasized on the hole and adaptation of technology to suit local markets by TWMNEs. Tolentino (1993) foc utilize in term of the accumul ation of technological competence in the expansion of firms from developing countries which was consistent with the resource-based view of building competitive advantage in strategic management. The accumulation of knowledge and competence especially its knowledge of developing markets and not so much its technology by the CP congregation in Thailand was the key to its internationalization. There are also differences between the CP Group and Western MNEs (Pananond and Zeithaml, 1998). Mathews (2002, 2006) postulated that emerging firms could foster internationalization via leverage of their contractual linkages with other foreign firms to acquire resources and learning new capabilities. He indicated that this explanation complemented the OLI framework and could be utilise to explain the rise of such latecomer firms which he dubbed as Dragon multinationals.2.2.7 Asian sceneYeung (1999) Zutshi Gibbons (1989) portrayed that western theories on internationalization have discount th e active role played by the state and overlooked the institutional or contextual perspective in the internationalization of Asian. Asians state invariably plays a direct and active role in the internationalization of its MNEs. For example, the Singapore government played a key and direct role in the promotion of outward FDI (e.g., growth triangles, industrial parks in foreign countries), particularly from the early 1990s in its regionalization programs (Pang, 1994 Tan, 1995 ESCAP/UNCTAD, 1997). Incentives and other programs for instance measure incentives, finance schemes, schooling also provided to foster the rapid development of local entrepreneurship in the regionalization efforts. In Malaysia, the government took a very active role in promoting the internationalization of Malaysian firms. Investment promotion missions abroad were organized and oftentimes lead by the Prime Minister. The government provided incentives including tax temporary removal in 1991 and subsequently f ull tax exemption in 1995 for income earned overseas and remitted back to Malaysia. An overseas investment guarantee program was instituted. Malaysian government instructed firms to defer non-essential overseas investment in order to reduce the impact of the effects of the 1997 Asian financial crisis. In the Asian context, the state has played a very active and direct role in promoting the internationalization of its national firms. This is much different with the western context, where the role of the state is benign and indirect.2.3 SummaryThis chapter first discussed the internationalization process in terms of entry notes and process, eclectic explanation, foreign direct investment, regional and global internationalization processes, Uppsala model and Asian context. The following chapter discusses the research method, survey development, and sample alternativeCHAPTER 3METHODOLOGY3.1 IntroductionThis chapter provides an overview of the research method. It starts by explaining th e appropriateness of the research method. Then discusses the research design which consists of cardinal steps questionnaire development, literature review, proposal, selective information collection, data analysis, discussion and conclusion, and write-up. attached the data collection and sample selection is discussed with reasons for each of the decisions involved. The next section discusses the statistical methods. Lastly, a Gantt graph will be use to estimate the times use in each activity.3.2 Sampling proficiencyA case study approach will be using in this paper. It tends to provide in depth information and intimate expatiate about the particular case being studied. This approach was used to collect comprehensive and holistic data (Eisenhardt, 1989 Internationalization Strategies of Emerging Asian MNEs 491 Yin, 1994) about firms that have internationalized their operations over time. The focus here is on MNEs from Malaysia (a fast developing country). cheek studies mean that th e research investigates few objects in many respects (Wiedersheim-Paul, Eriksson, 1991). Case studies are most suitable if you like to get a detailed understanding about different kinds of process (Lekvall Wahlbin, 1987). The researches may, for instance, choose a line of business and an enterprise, and conduct an in depth investigation (Wiedersheim-Paul, Eriksson, 1991). Yin (1994) states, that when the form of the questions is why and how, the case study strategy is most apparent to be appropriate.The research problem I have investigated was how the internationalisation process of a MNEs when entering to foreign market can be characterised , which was divided into four research questions.3.3 Data Collection3.3.1 Secondary dataEriksson Wiedersheim-Paul (1997) points out that utility(prenominal) data is data, which already has been collected by someone else, for another purpose. Statistics, and reports issued by governments , trade associations, and so on, are some sources of substitute data (Chisnall, 1997). The annual report and the enterprises homepage, are another sources of secondary data (Wiedersheim-Paul, Eriksson, 1991). Secondary data research should always be carried out before doing any field survey (Chisnall, 1991).When I had defined the research area, I started to search for relevant literature. The databases that I have used to find relevant literature are EBSCOhost, Science Direct, Libris, ABI/INFORM, and Helecon. The keywords used when searching the databases were international business, Malaysian MNEs, internationalization, strategies, mode of entry. These words were combined in different ways, to maximise the number of hits.3.3.2 Primary dInternationalization of Asian Multinational EnterprisesInternationalization of Asian Multinational EnterprisesINTRODUCTIONBackgroundInternationalization can be defined as the desire to be a member of the international society by satisfying a certain standard, or strengthening the influence of a nati on on other nations. It becomes the process where multinational enterprise (MNE) engaging, it is very important for these companies to penetrate international market if they want to be accepted and remain successful. (Sreenivasan Jayashree and Sahal Ali Al-Marwai). The internationalization process helps MNEs in maturate their operation in foreign market and enhance their competitive position abroad.According to Hedman (1993), three main alternatives for distributing the enterprises product exist, that is, indirect export, direct export and alternatives to export. When distributing indirectly, the different distribution activities are assigned to one or several intermediaries in the home market. When distributing directly, the producer itself conducts the distribution activities, such as distribution to a foreign importer, which in his turn forward the products to another intermediary or the end customer. (Molnar, 1990) the third alternative, alternatives to export, can take place th rough, for instance, own production in the target country, or licensing (Hedman, 1993).The rapid changes in todays business world call for new models of internationalization (Fillis, 2001 Meyer and Gelbuda, 2006), especially to be able to capture the early phase of internationalization in a better manner than the traditional models (Johanson and Vahlne, 2003). In contemporary research, Coviello and McAuley (1999), in line with Leonidou and Katsikeas (1996), have pointed at three theory directions that are preferable for studying internationalization, namely Foreign Direct Investment (FDI)-theories (a.k.a., the theory of the Multinational Firm), Stage models and Network theory. Even though these are different theory directions, they are seen to be complementary views where a combination of views is preferred since it is difficult to capture the internationalization concept using only one theoretical framework (Bell et al., 2003 Bjrkman and Forsgren, 2000 Coviello and Munro, 1997 Meye r and Skak, 2002). Network theory is increasingly being combined with stage theory in order to understand and explain the rapid internationalization of the firm (in Bell et al., 2003 Johanson and Vahlne, 1990, 2003 Meyer and Skak, 2002).The process of internationalization has been the subject of widespread theoretical and empirical research (for example, Johanson and Wiedersheim-Paul 1975 Johanson and Vahlne 1977 Bilkey 1978 Cavusgil 1980 Turnbull 1987 Welch and Loustarinen 1988) and finds a general acceptance in the literature (Bradley 1991 Buckley and Ghauri 1993 Leonidou and Katsikeas 1996). The internationalization process is described as a gradual development taking place in distinct stages (Melin 1992).Internationalization processes in emerging markets, as in international markets in general, take place in a stepwise manner (Jansson, 2007). Companies commit themselves through a gradual learning process. Learning is incremental and takes place by doing. Firms learn about doing business abroad, for example, learning about the conditions in particular markets. Companies tend first to establish themselves in geographically and culturally proximate markets and increase their commitment, starting with agents, and passing through sales companies to manufacturing companies (Johanson and Vahlne, 1977 Johanson and Wiedersheim-Paul, 1975).Within the last decades, the business world has changed drastically through globalization and internationalization creating a new and fierce business environment for companies. We can now see a third wave of internationalization of firms in which companies domiciled in mature Western markets establish themselves on a large scale in emerging markets such as Central and Eastern Europe (CEE), Russia, China and India (Jansson, 2007).A recent phenomena of firm from Asian capital exporting countries were internationalizing and multinationalizing their business activities and have emerged or are emerging as Asian multinational enterprise s (World Bank, 1993). They started the internationalizing activities and investing and setting up operation in other countries since mid-1980. Research interest which focus on these Asian enterprises and their direct investment activities arise in recent years (Ting, 1985 Ulagado et al., 1994 Yeung 1994, 1997). Foreign direct investment (FDI) started on the early 1980s. According to studies done by Lall, 1983Well, 1983 Kumar and McLeod, 1981 Khan, 1986 Monkiewicz, 1986 Aggarwal and Agmon,1990 Tolentino, 1993, FDI of Third World multinational enterprises (TWMNEs), slightly different with the traditional MNEs from the western developed countries in term of their characteristic. The growth of East Asia (World Bank, 1993) in late 1980 and early 1990, has increased intra-regional direct investment. The directed investment process from Japan , followed by Korea, Taiwan, Hong Kong and Singapore and the activities transferring from one level of economies to another in Malaysia, Indonesia an d Thailand has been depicted as wild flying geese pattern. (Toh and Low,1994 Guisinger, 1991). As a result, these Asian capital exporting countries firm internationalizing and multinationalizing their business activities and have emerged or are emerging as Asian multinational enterprises (World Bank, 1993).Problem StatementDuring these extremely competitive times, the international business environment is one that is normally full of immense uncertainty, volatility as well as a high rate of failure when it comes to international expansion The research on the nature, organization and operations of these emerging Asian international and multinational enterprises are limited. This is because research in international business and trade has been dependent largely upon economistic and western-centric theories developed predominantly in industrial and institutional economics (Buckley and Casson, 1985 Dunning, 1988, 1993). A study shown internationalization is the crucial factor for a firm to grow and develop economically and technologically (Syed Zamberi Ahmad and Fariza Hashim, 2007). Hence, it is very important for multinational companies to conduct a comprehensive examination of the various important factors that could influence the type of strategy that is to be selected for international market entry.1.3 ObjectivesThis research is dedicated to all local Malaysian companies who are looking at ways and means to internationalize their operations to a foreign market and would be of tremendous assistance to them in determining the correct strategic path and improve the understanding of the Asian MNEs characteristic.1.4 Research QuestionAccording to the problem statement above, the author has formulated some question to meet the research objective. The questions areWhat are the key characteristics and success of their foreign ventures?What are the motives for internationalization?What are the entry strategies?What are the strategic advantages and traits?Research Cont ributionGovernment Through this study, government can carry out some government policy to lead more firm success in their international proses in expanding their business.Firms This study provides information to provide better understand characteristic and strategy for the purpose of internationalization which can increase the net profit of the firm.Economic This study enable economist to better understand how development of economic on a country can help MNEs in their internationalization process.1.6 SummaryThis study proposal consists 3 chapters. Chapter 1 provides the overview of the recent phenomena of internationalization, the problem statement, objectives, and question. Chapter 2 displays literature review by past research, followed by concept and theories, and research framework. Chapter 3 describes the research methodology, sampling technique, data collection, data analysis and research planning that use to analysis the finding in Chapter 4.CHAPTER 2LITERATURE REVIEW2.1 Intr oductionThis chapter reviews the past studies about the concept and theory which included internationalization process, entry notes and process, eclectic explanation, foreign direct investment, regional and global internationalization processes, Uppsala model and Asian context. After that it follows by the research framework.2.2 Concept and Theory2.2.1 Internationalization processesInternationalization processes in emerging markets, as in international markets in general, take place in a stepwise manner (Jansson, 2007). Companies commit themselves through a gradual learning process. Learning is incremental and takes place by doing. Firms learn about doing business abroad, for example, learning about the conditions in particular markets. Companies tend first to establish themselves in geographically and culturally proximate markets and increase their commitment, starting with agents, and passing through sales companies to manufacturing companies (Johanson and Vahlne, 1977 Johanson an d Wiedersheim-Paul, 1975). Research on the exports of mainly North American companies has reached similar results (Bilkey, 1978 Cavusgil, 1980 Czinkota, 1982 Reid, 1981). Such process theories are highly useful especially when studying international 66 H. Jansson, S. Sandberg / Journal of International Management 14 (2008) 6577 business in CEE. Learning processes are essential since the company needs to adapt to an emerging and different business context, such as exists in the CEE (Meyer and Gelbuda, 2006).As noted by Sharma and Blomstermo (2003b) a basic assumption in internationalization process theory is that knowledge accumulation is continuous and dependent upon the duration of foreign operations. The longer firms have been involved in foreign operations, the more knowledge they accumulate about such operations. There is a relationship between knowledge accumulation and risk so that the more knowledge a firm has, the less uncertain they perceive the foreign market to be. Firms that lack knowledge about foreign markets even tend to overestimate risks. This corresponds to what Jansson (1989) found concerning establishment processes in a regional perspective, namely that the pace of investments in Southeast Asian countries accelerated, the more experienced the firms became in an area. Johanson and Vahlne (1990) stated that Uppsala model of internationalization indicated firms reveal an evolutionary process in internationalizing through a series of evolutionary stage.2.2.2 Entry nodes and entry processesFirms entering emerging markets face several barriers according to Meyer (2001). These barriers include a lack of information, unclear regulations and corruption. According to traditional research on internationalization processes, market entries either take place through intermediaries such as agents or distributors or through a firms own representative in the exporting/importing country, mainly a subsidiary.In terms of research in this area, scholars have fo und that relationships are at the core of the internationalization process (Axelsson and Johanson, 1992 Ford, 2002 Hkansson, 1982 Hkansson and Snehota, 1995 Hammarkvist et al., 1982 Jansson, 1994, 2007 Johanson and Vahlne, 2003 Majkgrd and Sharma, 1998).According to the network approach to internationalization, entries into local market networks take place through establishing relationships. The international marketing and purchasing of products and know-how through a direct exporter/importer network means that a vertical network in the exporting region (e.g. a suppliers supplier network) is indirectly connected to another vertical network in the importing region (e.g. a buyers buyer network). This large vertical network will, in turn, be embedded in other regional and national networks, such as a financial network (Jansson, 2006, 2007).From a network perspective, establishment points in foreign market networks are defined as entry nodes. There are various routes into these networks , or nodes by which a firm can enter a network. Entries through trade either take place H. Jansson, S. Sandberg / Journal of International Management 14 (2008) 6577 67 directly with customers or indirectly through intermediaries. Direct relationships, dyads, can be established between buyer and seller in the respective countries. Indirect relationships, triads, involve an outside party or other type of entry node, usually an intermediary such as an agent, dealer or distributor. Dyads can also be established through the entry mode FDI (a subsidiary in the importing country).Entry processes take place by building relationships to form networks in foreign markets. Irrespective of entry node, the development of international buyer/seller relationships tends to follow a five stage pattern (Ford, 1980, 2002 Ford et al., 1998). Each stage of the entry process can be described by a number of relationship factors, such as how the experience, commitment and adaptations of the parties increase across the stages and how the distance and uncertainty between them are reduced across the stages.The first stage includes the taking-up of marketing/purchasing activities before a formal relationship begins. The next three stages show how direct buyerseller relationships within networks are established from their beginning and to their deepening. Experience indicates the amount of experience the respective parties have with each other. They will gauge their partners commitment to the relationship, e.g. by the willingness to make adaptations. Distance is multifaceted and it can be split into social, cultural, technological, time and geographic distance. Uncertainty deals with the fact that at the initial stages, it is difficult to assess the potential rewards and costs of the relationship. In the fifth and final stage, the relationship is extensively institutionalized and habitual, with commitment being taken for granted.Based on Terpstra and Sarathy, 1991 and Baek, 2003, joint ven tures with host governments and local partners in the host country were among the preferred entry strategies for international operational operation. Petronas in South Africa entered into a commercial alliance with Engen in 1996 as a strategic partner. The acquisition was to enable both companies to implement a shared growth strategy in Africa and the Indian Ocean Rim, while allowing the development of potential operational synergies between the two business entities (Padayachee and Valodia, 2002).2.2.3 Eclectic ExplanationEclectic Paradigm is a proverbial known explanation of international production.Dunnings (1977, 1988, 1993, 1995). Eclectic Paradigm stated that the extent and pattern of international production is determined by1) Ownership advantages (for example, proprietary technology, products, expertise and skill)2) Internalization advantages (for example, transaction costs reduction, maximize economic return), and3) Location advantages of host and home countriesThese OLI (O wnership Location Internalization) variables listed above explain the reason internationalization occurs but overlook the dynamic process of internationalization. The Eclectic paradigm is provided by the Investment Development Path (Dunning, 1981, 1986) with a dynamic dimension, and relates the net outward investment of a country to its stage of economic development.Five stages of IDP ( Investment Development Path)Stage 1 At low level of economic development, there is little inward or outward investments.Stage 2 Inward investment becomes attractive, especially in import substitution projects as the country develops. Some outward investment may take place in neighborly countries which at lower stages of development. Most developing countries with some outward investments are at this stage.Stage 3 With economic development move forward, net inward investment declines while outward investment increases (relative to inward investment). Increasing of outward investment may take place in countries at lower IDP stages in order to overcome cost disadvantages in labour intensive industries and also to seek markets or strategic assets. Singapore, Taiwan and South Korea are said to be at this stage.Stage 4 As production being multinationalized, net outward investment becomes positive. Most developed countries are at this stage.Stage 5 The shift from advantages based more on factor endownment to those based on internalizing international market convergent outward and inward investment flows.Empirical research on Third World (including Asian) multinationals has given general support to the IDP concept (Dunning, 1986 Tolentino, 1993 Dunning Narula, 1996 Lall, 1996). Dunning and Narula (1996) acknowledge that country factors may influence the IDP pattern of a country, such as resource endownment, home market size, industrialization strategy, government policy, and the organization of economic activities. TWMNEs were smaller than their counterparts from developed countries an d have limited number of overseas operations. The competitive advantages of TWMNEs were based on cost advantages (particularly labour cost) and greater responsiveness to host country needs which is different from western MNEs. They served market niches which were not covered by the traditional MNEs and so were not in direct competition with them. The major motivation for these FDI was protecting export markets rather than exploiting rent from proprietary technological know-how (or other ownership specific advantages characteristic of western MNEs) explained in theories, such as the eclectic paradigm of Dunning (1977, 1995). TWMNEs possessed first or second generation labour-intensive technologies and produced standardized products mainly for the domestic host country market which at stage 4 of IDP. Wells (1983) presupposes a pecking order hypothesis to suggest that the TWMNEs technologies could fill the technological gap between the advanced technology of developed country MNEs and the rudimentary technology of less developed countries (LDCs) in a pecking down order. Lall (1983) emphasized the flexibility and adaptability of TWMNEs technologies to be more suitable or appropriate to LDC situations.2.2.4 Foreign Direct Investment (FDI)It may seem surprising that there is significant number of foreign direct investments by some firms from developing countries because it is usually credited to more developed countries. A number of studies indicate that FDI flows not only from the industrialized or well-developed countries, as well as developing countries. Scholars such as Lecraw (1981, 1993), Wells (1977, 1981), Lall (1983a, and 1983b), Kumar and Lim (1984), Ulgado et. al., (1994) are only some of those who have carried out empirical studies and researched FDI flows from developing country firms in the 1970s and 1980s. Comparisons between the nature of international expansion of firms from developing countries and the nature of those corporations that originated f rom developed countries are made in most of these studies (Dunning, 1986 Vernon-Wortzel and Wortzel, 1988). In general, it has been depicted that the competitive advantages of MNCs from developed country are derived from advanced proprietary technology or other superior resources (Yeung, 1994). While ability to reduce costs of imported technology through de-scaled manufacturing or smaller scale of production is focus of the competitive advantage from developing country MNCs were derived from their This is a process whereby technologies from industrialised countries are adapted to suit smaller markets by reducing scale, replacing machinery with manual labour, and relying on local inputs (Ramamurti, 2004).Outward direct investment from developing countries started to grow rapidly to a sizeable magnitude during the mid-1980. This became the main tool of developing country multinationals in demanding that their constituent firms prepare for the drastically international competition that they were about to face(Kumar, 1996, 1997). The emergence of new technologies in the late 1980s somehow decreases the interest in outward direct investment from developing countries subsided (Kumar, 1996 Oh et. al., 1998 Pananond and Zeithaml, 1998 van Hoesel, 1999). Pananond and Zeithaml(1998) and van Hoesel(1999) recounted that aggregate analyses of developing country MNEs conducted at the industry level get attention from scholars and yielded interesting results by the early 1990s. They concluded that there were marked differences in characteristics between developing country MNEs in the 1980s and 1990s. Scholars posited that these two groups of MNEs belonged to two different waves of development in term of their respective historical backgrounds, nature of businesses, extent of the role of government in operations and transactions, geographical direction, and mode of internationalisation activity. MNEs in the 1980s are more concerned with cost competitiveness with their competi tors (van Hoesel, 1999). In contrast, developing country MNEs in the 1990s placed greater emphasis on the development and reset business strategies due to the dynamic changing patterns of world business structure brought about by trade liberalisation and economic globalisation (Dunning et al., 1997). Besides this, they put more effort on technological competence as the source of competitive advantage (Pananond and Zeithmal, 1998). They noted that notwithstanding these differences, there existed several significant interrelated points of convergence between the two groups (Dunning et al., 1997 van Hoesel, 1999).2.1.5 Regional and global internationalization processesIn analyzing the early internationalization steps of smaller and less experienced companies, the internationalization process model by Johanson and Vahlne (1977) is regarded as a highly useful tool. In internationalization research, few studies have been conducted on higher level internationalization where companies are e stablished in several countries and have fully-owned businesses (Meyer and Gelbuda, 2006). The more countries in a region a firm exports to, the more extensive is the regional internationalization process. The more regions a firm exports to, the more global is the internationalization process.New stages of internationalization are established when a firm extends its business from one major type of market to another or from one type of foreign environment to another. The main factor behind these stages is experiential knowledge, meaning that firms gradually build a knowledge base through operating in foreign markets. They learn from past experience by transforming this experience to useful knowledge. There are three types of such knowledge (Eriksson et al., 1997). Internationalization knowledge about how to perform international operations is an expression of a firms current stock of knowledge in the form of its resources and capabilities. The more novel the foreign environment, the more difficult it is for the firm to apply its current stock of knowledge to that foreign market. This means that there is a gap between a firms present internationalization knowledge and the knowledge the company has about how to do business in the specific foreign market, i.e. concerning its network experiential knowledge and institutional knowledge (Blomstermo et al., 2004).Based on a firms experiential knowledge process, internationalization processes are often divided into different degrees of internationalization. Johanson and Mattsson (1991) discuss the internationalization process for firms with various degrees of internationalization and propose that the process is mainly valid during the early stages of a firms internationalization inexperienced firms tend to follow a traditionally slow and gradual pattern, while the internationalization of a more experienced company is less slow and gradual.2.2.6 Uppsala modelThe Uppsala model (Johanson Weidersheim-Paul, 1975 Johanson Va hlne, 1977) provides an explanation of the dynamic process of internationalization of individual firms. The Uppsala model emphasize on the importance of gaining knowledge and experience about the characteristics of foreign markets along the internationalisation path, and helps MNEs reduced risks and levels of uncertainty in unfamiliar foreign environments before investing (Wiedersheim-Paul et al., 1978).The successive steps of increasing highly commitment are based on knowledge acquisition. Foreign activities started with export to foreign country through independent representative or agent, after that establish sales subsidiary and finally start production in the host country. The internationalization of the firm across many foreign markets was particularly related to psychic distance which included differences in language, education, business practices, culture and industrial development. Firstly, enter foreign market which closer in term of psychic distance, followed by subsequen t entries in markets with greater psychic distances. Same goes to entry mode of foreign market. The incremental expansion of market commitment meant that the initial entry was typically some form of low commitment mode and followed by progressively higher levels of commitment. Obviously, commitment of the level of ownership in different markets was correlated with their psychic distance. The Uppsala model had received general support in empirical research (Welch and Loustarinen, 1988 Davidson, 1980, 1983 Erramilli et al., 1999) and its largely intuitive nature and evolutionary learning perspective made it attractive as an explanatory model.A related view regards learning was that TWMNEs built up their advantages through the accumulation of technology and skills. Lall (1983) emphasized on the localization and adaptation of technology to suit local markets by TWMNEs. Tolentino (1993) focused in term of the accumulation of technological competence in the expansion of firms from develop ing countries which was consistent with the resource-based view of building competitive advantage in strategic management. The accumulation of knowledge and competence especially its knowledge of developing markets and not so much its technology by the CP Group in Thailand was the key to its internationalization. There are also differences between the CP Group and Western MNEs (Pananond and Zeithaml, 1998). Mathews (2002, 2006) postulated that emerging firms could foster internationalization via leverage of their contractual linkages with other foreign firms to acquire resources and learning new capabilities. He indicated that this explanation complemented the OLI framework and could be used to explain the rise of such latecomer firms which he dubbed as Dragon multinationals.2.2.7 Asian ContextYeung (1999) Zutshi Gibbons (1989) portrayed that western theories on internationalization have neglect the active role played by the state and overlooked the institutional or contextual pers pective in the internationalization of Asian. Asians state always plays a direct and active role in the internationalization of its MNEs. For example, the Singapore government played a key and direct role in the promotion of outward FDI (e.g., growth triangles, industrial parks in foreign countries), particularly from the early 1990s in its regionalization programs (Pang, 1994 Tan, 1995 ESCAP/UNCTAD, 1997). Incentives and other programs for instance tax incentives, finance schemes, training also provided to foster the rapid development of local entrepreneurship in the regionalization efforts. In Malaysia, the government took a very active role in promoting the internationalization of Malaysian firms. Investment promotion missions abroad were organized and often lead by the Prime Minister. The government provided incentives including tax abatement in 1991 and subsequently full tax exemption in 1995 for income earned overseas and remitted back to Malaysia. An overseas investment guara ntee program was instituted. Malaysian government instructed firms to defer non-essential overseas investment in order to reduce the impact of the effects of the 1997 Asian financial crisis. In the Asian context, the state has played a very active and direct role in promoting the internationalization of its national firms. This is much different with the western context, where the role of the state is benign and indirect.2.3 SummaryThis chapter first discussed the internationalization process in terms of entry notes and process, eclectic explanation, foreign direct investment, regional and global internationalization processes, Uppsala model and Asian context. The following chapter discusses the research method, survey development, and sample selectionCHAPTER 3METHODOLOGY3.1 IntroductionThis chapter provides an overview of the research method. It starts by explaining the appropriateness of the research method. Then discusses the research design which consists of seven steps question naire development, literature review, proposal, data collection, data analysis, discussion and conclusion, and write-up. Next the data collection and sample selection is discussed with reasons for each of the decisions involved. The next section discusses the statistical methods. Lastly, a Gantt chart will be use to estimate the times use in each activity.3.2 Sampling TechniqueA case study approach will be using in this paper. It tends to provide in depth information and intimate details about the particular case being studied. This approach was used to collect comprehensive and holistic data (Eisenhardt, 1989 Internationalization Strategies of Emerging Asian MNEs 491 Yin, 1994) about firms that have internationalized their operations over time. The focus here is on MNEs from Malaysia (a fast developing country).Case studies mean that the research investigates few objects in many respects (Wiedersheim-Paul, Eriksson, 1991). Case studies are most suitable if you like to get a detail ed understanding about different kinds of process (Lekvall Wahlbin, 1987). The researches may, for instance, choose a line of business and an enterprise, and conduct an in depth investigation (Wiedersheim-Paul, Eriksson, 1991). Yin (1994) states, that when the form of the questions is why and how, the case study strategy is most likely to be appropriate.The research problem I have investigated was how the internationalisation process of a MNEs when entering to foreign market can be characterised , which was divided into four research questions.3.3 Data Collection3.3.1 Secondary dataEriksson Wiedersheim-Paul (1997) points out that secondary data is data, which already has been collected by someone else, for another purpose. Statistics, and reports issued by governments , trade associations, and so on, are some sources of secondary data (Chisnall, 1997). The annual report and the enterprises homepage, are another sources of secondary data (Wiedersheim-Paul, Eriksson, 1991). Second ary data research should always be carried out before doing any field survey (Chisnall, 1991).When I had defined the research area, I started to search for relevant literature. The databases that I have used to find relevant literature are EBSCOhost, Science Direct, Libris, ABI/INFORM, and Helecon. The keywords used when searching the databases were international business, Malaysian MNEs, internationalization, strategies, mode of entry. These words were combined in different ways, to maximise the number of hits.3.3.2 Primary d