Who goes abroad? International diversification by emerging market firms into developed markets

Recent research indicates that a new competitive landscape is developing because of globalization and technological innovation. An important element in the changing nature of global competition is the increased international diversification of emerging market firms (EMFs). Research on foreign direct investment (FDI) and international diversification has generally focused on large multinationals from developed markets. Although several studies have examined EMFs' FDI into emerging markets, very little research has examined the diversification of EFMs into developed markets.; Because EMFs tend to be at a relative resource disadvantage compared to developed market firms (DMFs), their diversification into developed markets poses a challenge to traditional international business and strategic management theories, which generally argue that firms are motivated to diversify into foreign markets when possessing firm-specific advantages that allow the firm to overcome the costs of being foreign. However, recent research suggests that firms are also motivated to engage in FDI in order to obtain valuable resources.; Building on insights from the resource-based view of the firm, institutional theory and the eclectic paradigm, this dissertation research focuses on EMFs' FDI into developed markets and argues that it is motivated by the possession of and quest for unique resources. However, only those EMFs that possess unique resources are capable of gaining access to new resources through international diversification.; Hypotheses are developed predicting that EMFs with higher levels of unique resources will diversify into developed markets. Event-history methodology is used to test these hypotheses on a sample of 115 Latin American firms. The results indicate that technological capabilities, international experience, “grupo” membership, previous state ownership and alliance experience increase the likelihood of an EMF entering a developed market. The results also show that resources related to the first entry are different from those related to multiple entries.; This dissertation research contributes to the international business and strategic management literature by explaining the firm-specific motivations for EMFs' FDI into developed markets. Further, it provides the first empirical test of the phenomenon. The results indicate that EMFs possessing unique resources, although sometimes different from those possessed by DMFs, are capable of entering developed markets.