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Charting Dynamic Trajectories: Multinational Enterprises in India

Published online by Cambridge University Press:  10 April 2014

Prithwiraj Choudhury  and
Tarun Khanna
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Abstract

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In this article, we provide a synthesizing framework that we call the “dynamic trajectories” framework to study the evolution of multinational enterprises (MNEs) in host countries over time. We argue that a change in the policy environment in a host country presents an MNE with two sets of interrelated decisions. First, the MNE has to decide whether to enter, exit, or stay in the host country at the onset of each policy epoch; second, conditional on the first choice, it has to decide on its local responsiveness strategy at the onset of each policy epoch. India, which experienced two policy shocks—shutting down to MNEs in 1970 and then opening up again in 1991—offers an interesting laboratory to explore the “dynamic trajectories” perspective. We collect and analyze a unique dataset of all entry and exit events for Fortune 50 and FTSE 50 firms (as of 1991) in India in the period from 1858 to 2013 and, additionally, we document detailed case studies of four MNEs (that arguably represent outliers in our sample).

Type
Research Article
Information
Business History Review , Volume 88 , Issue 1: Business, Networks, and the State in India , Spring 2014 , pp. 133 - 169
Copyright
Copyright © The President and Fellows of Harvard College 2014 

References

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27 Pure R&D entry referring to an entry with the only function of the firm as R&D in India.

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62 We conducted very preliminary analysis using stock prices for Hindustan Unilever in India. This analysis indicates that while both HUL and the parent Unilever outperformed their relative stock market indices from 1990 to 2013, HUL disproportionately outperformed the parent Unilever on that measure from 1993 to 2007. This indicates that the Unilever India strategy of stay/stay was paying rich dividends for the firm, even compared to the performance of the global parent.

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