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Determinants of Internationalization Strategies of Emerging

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Determinants of Internationalization
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Graduate School of Management, St. Petersburg University, St.
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DOI: 10.1080/10669868.2012.709922
Determinants of Internationalization
Strategies of Emerging Market Firms:
A Multilevel Approach
IRINA MIHAILOVA
Management and International Business, Aalto School of Economics, Helsinki, Finland
ANDREI PANIBRATOV
Downloaded by [Irina Jormanainen] at 05:36 21 December 2012
Graduate School of Management, St. Petersburg University, St. Petersburg, Russia
Recently, debates about uniqueness of emerging market firms’

(EMFs) internationalization strategies were a focus of research.
Yet, findings regarding their determinants are mixed, and conclu-
sions on how EMFs’ internationalization strategies can be theoreti-
cally explained vary greatly. This article elaborates on the
underlying reasons for these inconclusive results and addresses
them by the development of a multilevel theoretical framework
allowing for a better understanding of integrative influence of insti-
tutional, sector, and firm-specific determinants of EMFs’ internatio-
nalization strategies. This framework is validated by evidence from
Russia, and a multiple case study approach is adopted to investigate
the determinants of internationalization strategies of Russian firms.
KEYWORDS emerging market firms, internationalization, Russia
INTRODUCTION
The phenomenon of international expansion of emerging market firms

(EMFs) has come progressively into focus of academic research during the last
several years (Kalotay and Sulstarova 2010; Zou and Ghauri 2010; Buckley
et al. 2008; Luo and Tung 2007; Chittoor and Ray 2007). Although firms from
emerging markets already began their international operations in the early
Received February 27, 2012; accepted July 4, 2012.

Irina Mihailova has previously published under her former surname Jormanainen.
Address correspondence to Irina Mihailova, Aalto School of Economics, Management
and International Business, Lapuankatu 6, Helsinki, 00101 Finland. E-mail: irina.jormanainen@
aalto.fi
157
158 I. Mihailova and A. Panibratov
1980s, the significant increase in the scale and scope of expansion took place
only in the beginning of the 2000s (UNCTAD 2011). One of the most interesting
and distinctive features of this phenomenon are the strategies adopted by EMFs
that have allowed them to enter successfully the international business arena
and to establish their strong presence. These strategies are characterized by a
large diversity and are often described as being highly aggressive and rapid,
which differs from the expansion approach of developed countries’ firms (Math-
ews 2006). Due to these features, the strategic behavior of EMFs has an increased
attention from academic scholars who explain theoretically and understand the
underlying reasons behind this phenomenon (Luo and Rui 2009; Tsai and Eisen-
gerich 2010; Child and Rodriguez 2005; Fortanier and Van Tulder 2009). As
emphasized by Jormanainen and Koveshnikov (2012) in their review, the con-
clusions about both the uniqueness and the determinants of strategic
approaches adopted for international expansion by EMFs are mixed when some
scholars argue for the need of new theoretical explanations (e.g., Luo and Tung
2007), while others suggest applying the existing theories with some modifica-
tions in concepts and causal relationships (e.g., Cuervo-Cazurra and Genc 2008).
The objectives of this article are threefold. First, it aims to reveal the
underlying reasons behind the mixed findings with respect to the determi-
nants of EMFs’ internationalization strategies. We argue that studies explain-
ing the logic behind the international expansion do not explicitly recognize
the fact that there is a greater heterogeneity in internationalization strategies
followed by EMFs than of those pursued by developed market firms in the
1970s attributable to the increased complexities arising from global business
environment. Moreover, despite the fact that a home institutional environ-
ment in emerging markets was recognized as the most important determinant
of EMFs’ behavior, research to date addresses it in a narrow manner using a
limited set of determinants, which is not sufficient to provide a thorough
explanation for the diversity of strategies followed by EMFs. Last, the literature
examines this phenomenon either at macro- or firm-level, often applying a
single theoretical perspective that results in a failure to grasp a comprehensive
understanding about the full range of their determinants.
The second objective of the article is to address these gaps and to develop
an integrative theoretical framework analyzing the influence of institutional,
industry and firm-level determinants on internationalization strategies of
EMFs. In the developed framework, we adopt the logic from the strategy
research, arguing for the value of a combined approach accounting for an
influence of external factors (‘‘external control’’ perspective) and firm-level
factors (‘‘strategic choice’’ perspective; Hitt and Tyler 1991; Papadakis,
Lioukas and Chambers 1998). The framework suggests that it is sector-specific
factors shaped by idiosyncratic macro-level institutions of emerging econom-
ies (North 1990) that predetermine a pattern of internationalization strategies
being followed by majority of firms in the given sector following with their
international expansion. Also, there are micro-level institutional pressures
Internationalization Strategies of Emerging Market Firms 159
(Di Maggio and Powell 1983) and strong direct relationships between govern-
ment and emerging market firms that force firms to conform to an overall
pattern. However, framework indicates that firm-specific resources and
capabilities might result in strategies deviating from this pattern to a certain
extent. This framework enables enhancing the existing knowledge of the
manner and degree of the impact that various-level determinants have on
the internationalization strategies in emerging economies. It allows better
understanding of the reasons behind the diversity of the strategies of EMFs
from single and from different emerging markets.
Our third objective is to validate the developed framework in the Russian
empirical context. We use an explorative approach and a multiple case study
method to analyze the internationalization strategies of 18 Russian companies
in seven most representative in terms of international activities industrial
sectors. We consider ‘‘industrial sector’’ as a ‘‘case’’ to verify whether the firms

in similar types of industries follow a particular pattern of internationalization,
and ‘‘firm’’ as a ‘‘sub-case’’ to examine the reasons for deviating strategies at the
organizational level. Russia was chosen as a source of empirical evidence due
to the consideration that it is one of the least examined economies in the emerg-
ing market literature and it has the second largest outward foreign direct invest-
ment (OFDI) stock (UNCTAD 2011). The empirically based findings enhance
knowledge of the specific features of internationalization strategies of Russian
companies and represent an important empirical contribution of the research.
The remainder of this article is as follows: In the beginning, we discuss the
inconsistencies and gaps in preexisting theorizing on the determinants of inter-
nationalization strategies of EMFs to elaborate on the first research objective;
then we develop the theoretical framework allowing us to address the identified
gaps as were stated in our second objective; this is followed by an explanation of
our methodological approach and empirical data; next, several sections present
the results of the empirical analysis and discussion; we conclude by stressing
theoretical and empirical contributions and avenues for future research.
THEORETICAL UNDERPINNING OF INTERNATIONALIZATION

STRATEGIES OF EMFS
The internationalization strategies of EMFs came into the focus of scholarly

research during the last decade when the scale and the scope of expansion
increased rapidly. They ‘‘generated interest, concern and controversies’’
(Kolstad and Wiig 2012, 26) and raised the following debate: positing whether
EMFs are unique ‘‘species’’ of multinational firms and whether conventional
internationalization theories can explain their behavior. To answer these ques-
tions, research to date has been conducted in a fragmented manner by distinc-
tively focusing on either macro- or micro-levels. In the former group of studies,
the analysis has been based primarily on institutional factors illustrating their
influence on patterns of investments from emerging economies, while the

latter group employed firm-level factors to explain the determinants of
EMFs’ strategies from resource-based, network, and organizational learning
perspectives. However, despite the effort to investigate the phenomenon from
different angles, the conclusions of the studies regarding the uniqueness of the
EMFs’ behavior and the logic behind their expansion strategy vary. As dis-
cussed in Jormanainen and Koveshnikov (2012), there are several reasons
for such mixed results that stem from inconsistencies in the theorizing on
the international expansion of EMFs and overlooking some important issues.
In this article, we would like to particularly emphasize two of them. First is the
existence of a great diversity in the internationalization strategies followed by
EMFs even when they originate from similar institutional environments that,
from our perspective, call for a more comprehensive and holistic approach
for their further examination. Second is the impact of institutions that was
assessed separately through analysis of macro-level factors (North 1990) or
micro-level pressures (Di Maggio and Powell 1983). This approach represents
a serious limitation in the attempt to understand the international strategies
of EMFs because the institutional environment has a particularly complex
influence on the activities of firms and needs to be accounted for in a more
inclusive manner.
We argue that the difficulty in gaining a holistic explanation of how EMFs
shape their internationalization strategies and in comprehending their diver-
sity stems from an application of either macro- or micro-approaches and from
a lack of studies combining several theoretical perspectives. The existing
research tends to examine either overall patterns of OFDI or specific causal
relationships between firm-level factors and strategic outcomes which are
not sufficient to thoroughly understand such complex phenomena as the
internationalization strategies of EMFs. It appears that there is a lack of agree-
ment on how the international expansion of EMFs can be comprehensively
explained and on how to account for the heterogeneity of internationalization
paths (Panibratov 2012). We stress that empirical research has not been
extended into a rigorous investigation of (1) the role of industry specific fac-
tors and (2) how they are interrelated with the institutional and firm-specific
determinants. Indeed, there is limited research aimed at understanding the
combined impact of these multilevel determinants of internationalization
strategy decisions while most of the empirical work focuses on either macro-
level institutions in the overall pattern of international expansion of EMFs or
single firm-level characteristics (e.g., organization structure or entrepreneurial
orientation) and their influence on internationalization strategies.
We propose that such an approach contributes toward establishing a
coherent theory on international strategies of EMFs. We ask: What are the
key determinants of internationalization strategy of EMFs? More specifically,
we seek to answer the question: To which extent do institutional, industry
and firm-level determinants influence the internationalization strategies of
EMFs? In the next section, we explain in detail our theoretical approach and
present a framework that addresses these questions.
To address this gap, we propose to adopt a premise of strategy research
that suggests integrating the ‘‘external control’’ and ‘‘strategic view’’ perspec-
tives for a better understanding of strategic decision making. The underlying
logic of this approach is that both external and firm-level factors play a role in
shaping the strategy (e.g., Papadakis et al. 1998). First is an external control or
‘‘environmental determinism’’ perspective stressing the fact that strategic
decisions in firms are made as a result of adaptation to opportunities, threats,
constraints, and other characteristics of the external environment, while man-
agers’ passive roles are limited to the facilitation of this adaptation (Bourgeois
1984; Porter 1980; Scherer 1980). The second perspective is a ‘‘strategic
choice’’ view emphasizing the decisive role of top managers in strategy forma-
tion (Child 1972; Montanari 1978). However, recent studies have emphasized
the value of an integrative approach combining both external and internal
factors in the analysis of strategic decisions (Hitt and Tyler 1991; Papadakis
et al. 1998).
We adopt this logic for understanding the determinants of internationa-
lization strategy of EMFs and suggest considering the external factors as a
combination of sector-specific and macro-level institutional determinants,
which have a strong influence at the sector-level by providing ‘‘the rules of
the game’’ (North 1990). From our perspective, the integration of
sector-specific factors into EMFs-research enables bridging macro- and
micro-level determinants analyzed separately in previous studies.
We argue that strategic choice at the firm level is greatly influenced by
these external factors but nevertheless might vary due to the firm-specific
resources and capabilities. At the same time, sociological pressures (Di
Maggio and Powell 1983) might force firms to conform in their behavior to
a certain legitimate pattern. These arguments are reflected in the framework
presented in figure 1, which illustrates the combinative role of external and
firm-level determinants in shaping internationalization strategy of EMFs.
Propositions’ Development
INDUSTRY-LEVEL DETERMINANTS
The industrial sectors represent structured organizational fields defined
according to the level and the type of technology, resource endowments,
competition type, and relationship with the state. Sectoral studies show that
such determinants as an access to markets, technology, and finance are differ-
entiating factors in shaping firms’ operations in various industrial sectors
(Yin and Shanley 2008). It has been found that the specific patterns of inno-
vative activities of firms are sector-specific (Pavitt 1984). Similarly, the sectoral
differences were suggested to influence the patterns of strategic alliances in
FIGURE 1 Theoretical framework (color figure available online).
transition economies, and Radosevic and Sadowski (2004, 52) propose that
‘‘sectoral features that come from inherited similar technological levels and
institutional deficiencies, primarily in capital markets, play an important role
in the pattern of alliances.’’ Finally, Radosevic (1999) points out that industrial
restructuring in transition economies was predominantly sector specific. The
types of technologies that characterize a given sector promote particular
forms of industrial organization, the nature of innovative activities, competi-
tive and collaborative relations, and regulative requirements.
The discussion stresses that sectoral differences define the specific pat-
terns of firms’ behavior in various areas. Following this logic, we argue that
industrial sectors provide a context in which attempts of individual firms to
internationalize result in the undertaking of homogeneous internationalization
strategies. In other words, as is shown in figure 1, sector-specific determinants
have a pre-defining impact on firms’ behavior and the choice of path for their
foreign expansion. We suggest that industry-specific characteristics such as
access to markets, capital, and infrastructure requirements play an important
role in shaping of internationalization strategies of EMFs. For example, firms
in sectors with capital-intensive infrastructure have limited opportunities for
greenfield expansion and are more likely to select M&A or partnership as stra-
tegic options for their international expansion. To conclude, we argue that:
Proposition 1: Sector-specific determinants such as market, capital,

technology, and infrastructure requirements represent a
powerful pressure for shaping internationalization strate-
gies by EMFs.
MACRO-LEVEL INSTITUTIONAL DETERMINANTS

While arguing for the important impact of industry-specific determinants, it
is vital to account for the influence of macro-level institutions on sectoral
development. These institutional forces are referred to as the ‘‘rules of
the game’’ and are understood as the set of formal rules and informal
constraints that govern economic activity in the country (North 1990). Such
rules shape the standards of technology, resource endowments, and inno-
vation patterns. Indeed, the institutional factors define the pace and level of
industrial development in the country and its comparative technological
advantages. We stress the validity of the argument that individual firms
are involved in the sector-based networks and their strategies are also
closely connected to the available institutional sector support (Nelson
1997). The framework of the study (see figure 1) aims to illustrate that there
is a strong influence of institutional factors on sector-specific determinants

through setting the standards and provision of the resources and incentive
structures.
Political factors have a particularly powerful influence on patterns of
sector development in emerging economies. Examples of these factors are
the various government decisions providing a special support to strategically
important industries and the development of competition policies affecting
the monopolistic nature of competition in industry—to name just a few
(Dolata 2005; Kemp, Rip, and Schot 2001; Larédo and Mustar 2001). This
stresses that a degree of state participation in the sector development repre-
sents another important determinant of the institutional influence.
Furthermore, the institutional influence is closely interrelated with the
promotion of industrial restructuring. Patterns of restructuring are institution-
ally determined and vary across industries according to the market demand,
finance, and technological requirements. A perspective in which technical
and institutional change are explicitly linked is the ‘‘systems of innovation’’
perspective (Edquist 1997; Lundvall 1992; Nelson 1993). The literature on
national systems of innovation in the context of emerging economies demon-
strates the strong role of macro-institutional factors in determining the basic
features of technology accumulation, technical change, and diffusion of
innovation during the transition period (Radosevic 1999; Radosevic and
Sadowski 2004). The problems in the pace of the restructuring can be fixed
domestically or with the assistance of foreign investors. Inward and outward
FDI policies are also sector-specific and developed to assist the domestic
industrial development. To summarize, we suggest that:
Proposition 2: Sector-specific determinants that shape the patterns of

internationalization strategies are strongly affected by the
macro-level institutions in general, and a degree of a state
influence in particular.
Despite the importance of the above-mentioned sector-specific and

institutional determinants, they alone cannot determine the final outcomes
of internationalization of EMFs. As the strategic choice view postulates, the
firm-specific factors also play an important role in strategy formation, and
we assume that this logic applies also for the internationalization strategies.
Next we discuss how firm-specific resources and capabilities and various
sociological pressures might alter the overall strategic approaches existing
in an industrial sector.
FIRM-LEVEL DETERMINANTS
As opposed to the deterministic view supporting the importance of contextual
influence in strategy making, the ‘‘management choice’’ and ‘‘firm’’ perspec-
tives emphasize the role of firm resources and the role of managers (Child
1972; Cyert and March 1963). In strategy research, firm-level determinants
such as characteristics of CEOs, leadership styles, internal systems, company
performance, and types of corporate ownership affect firms’ choice with
regard to the strategic alternatives available to them (Hitt and Tyler 1991;
Romanelli and Tushman 1986; Stein 1980).
In the emerging market field, the number of studies examining the
influence of specific firm-level factors has been expanding. Such resources
as personal, inter-firm, and alliance networks (Kotabe, Jiang, and Murray
2010; Musteen, Francis, and Datta 2010; Thomas et al. 2007), common lan-
guage with international partners (Musteen et al. 2010) and ethnic identity
(Miller et al. 2008) were found to assist EMFs in overcoming the liability of
foreignness that they face when operating in developed markets. Entrepre-
neurial motivation has also been shown to be a very important resource
influencing the internationalization path that outbalances the lack of
education, pre-internationalization experience, and technological and
managerial knowledge (Liu, Xiao, and Huang 2008). Ownership structure
(Bhaumik, Driffield, and Pal 2010) was argued to influence strategic orienta-
tions of EMFs and to affect their internationalization results. In addition to
resources, EMFs also have distinctive capabilities such as the ability to oper-
ate in weak institutional environments (Del Sol and Kogan 2007) and to treat
global competition as an opportunity to build missing capabilities (Bonaglia,
Goldstein, and Mathews 2007). Also, EMFs have an adaptive capability
to transform key resources into positive performance outcomes (Lu et al.
2010). Therefore, we argue:
Proposition 3: Firm-specific resources and capabilities affect the success

and the scale of the implementation of the internationali-
zation strategies’ pattern pre-defined by sectoral and
macro-institutional determinants and might result in
deviating from those strategies’ pattern.
INSTITUTIONAL DETERMINANTS AT THE FIRM LEVEL

In addition to the above-described internal organizational factors, there are
also institutional factors affecting the strategic choice at the firm level (see
figure 1). In terms of macro-level institutions, perhaps, the direct interaction
between governments and firms was particularly emphasized in the EMFs’
research (Luo et al. 2010). Local governments might impose direct restrictions
and incentives on firm’s activities and developing factor endowments under-
lying their competitive advantages (Luo et al. 2010). An example of such
influence is the intervention into operations of national champions or firms
with state ownership even in those industries where the majority of compa-
nies are independent in their development.
There are other institutional forces of a sociological nature directly influ-
encing firms’ behavior. Specifically, the institutional environment imposes
coercive, mimetic, and normative pressures on firms to appear legitimate and

conform to prevailing norms (DiMaggio and Powell 1983; Oliver 1990; Scott
1995). EMFs’ scholars find that these pressures affect the choice of entry modes
as a means to appear legitimate in the host countries (Ang and Michailova 2008;
Demirbag, Tatoglu, and Glaister 2009; Deng 2009). Another example is mana-
gerial professional background, which represents one of the influencing factors
resulting in a certain degree of conformity in the firms’ behavior. In emerging
economies, this pressure is particularly evident when there is a pressure to
avoid a ‘‘soviet style’’ management and to adopt a market-based style to appear
competitive in new economic realities. To summarize, we propose:
Proposition 4: There are specific macro- and micro-level institutional

forces directly affecting firms’ strategies, both of which
can either promote their deviating behavior or push to
conform to the general patterns existing in the industry.
THEORETICAL MODEL: TOWARD SYNTHESIS
The discussion in this section describes the logic behind the development of
the framework reflecting an integrative influence of various determinants on
the formation of the internationalization strategy. Figure 1 presents a model
that illustrates the main groups of these determinants shaping EMFs’ interna-
tionalization strategy development and the scope of their impact. The task of
this framework is (1) to show that industry-level factors predetermine the
pattern of the internationalization strategy, and sectoral development is
strongly affected by macro-level institutions; and (2) to emphasize that within
each of these patterns, deviations are possible due to the diversity of firms’
specific factors and the impact of various micro-level institutional pressures
and the direct relationships between firms and the government.
To summarize, we argue that the internationalization strategy of EMFs

should be viewed as an outcome of influence of several groups of determi-
nants at industry- and firm-levels being embedded into an institutional
environment. The integration of industry-level determinants allows for
addressing the limitations in theorizing on the internationalization strategies
of EMFs as they shed light on logic behind the existence of certain patterns
in EMFs’ internationalization strategies, which, in turn, helps to comprehend
their diversity and to implement a comparison across various national contexts.
Indeed, firms in a particular sector experience similar resource, technology,
and institutional constraints and incentives and the need for infrastructure.
Within this set of constraints and incentives, firms follow the strategy based
on their own resources and capabilities and attempt to deal with other types
of micro-level pressures originating from the external environment.
This framework also accounts for another limitation associated with the
mixed role of institutions by illustrating the different levels and types of insti-
tutional impact. The importance of integrating macro- and micro-institutions
has been emphasized in other recent studies (e.g., Dunning and Lundan
2008) that make explicit integrated, institutionally based advantages into an
internationalization framework.
There are several important implications of this framework. First, it
explains how multiple-level forces result in different internationalization
strategies within a single institutional environment. Second, it points to the
fact that the patterns of strategic choice are defined at the sectoral level and
modified according to firm-specific characteristics. This allows for a more
informed comparison of strategy across contexts. Finally, the model suggests
a more ‘‘fine-grained’’ approach to the understanding of the institutional
forces affecting the firms’ behavior and in explaining the existing heterogen-
eity in internationalization strategies. We emphasize that, in the search for
patterns of international strategies, one should look beyond the institutional
similarities and integrate industry-specific determinants due to the fact that
industrial sectors provide firms with a set of homogeneous conditions that
differ greatly across different industries.
We validate this framework by drawing upon an empirical investigation
of internationalization strategies followed by firms from different industrial
sectors of the same home country. Next we discuss our methodology, data,
and empirical findings.
METHODOLOGY AND DATA
To provide an empirical support for an inductively developed theoretical

framework, we use the Russian context. There are several reasons behind this
choice. First, Russia has the second largest stock of OFDI (Panibratov and
Kalotay 2009), and Russian multinational enterprises (MNEs) have affiliates
all over the world. Second, Russian firms pursue a wide range of strategies and
represent a suitable ground to verify the validity of theoretical arguments for
an examination of reasons behind the diversity of internationalization strate-
gies pursued by EMFs from a single national context. Third, Russia is one of the
least-examined economies in the emerging market literature, and this article
would enhance the knowledge of the specific features of Russian internalizing
companies.
We selected a case study research method, which has a high exploratory
power (Eisenhardt 1989; Yin 2003). It is particularly useful in those research
contexts where previous theory seems incomplete and there is a need for dee-
per theoretical development. Russian firms’ internationalization is a recent
phenomenon, and we see the case study method to be the most appropriate.
The logic behind our empirical approach was to analyze the internatio-
nalization strategies of Russian companies in those industrial sectors that

witness an expansion overseas and to draw conclusions on how they are
influenced by institutional, sector, and firm-level determinants. In our analy-
sis, we use both secondary and primary data on industrial sectors and interna-
tionalization strategies of firms to draw conclusions. We followed three steps
in the analysis. First, we examined sector-specific factors and institutional
forces affecting the sectoral development through literature observation and
industries’ experts meetings (who were mostly in the companies’ CEOs and
ex-CEOs positions or representatives of regional administrations and govern-
mental institutions). These meetings took place in several of the largest cities
of Russia (Moscow, St. Petersburg, Kazan, Yekaterinburg, Nizhniy Novgorod,
and Novosibirsk). Based on the results of our analysis, we classified sectors
included into this study into four groups according to two main criteria: the
intensity of technology and infrastructure and the degree of state control.
Next, we analyzed the strategies within each of these groups to verify an exist-
ence of certain similarities of internationalization strategies and described the
main features of revealed patterns. Last, we have defined the ‘‘outlier’’ firms in
each of the groups whose strategies deviated from the overall pattern and
have analyzed the reasons for this deviation. Here, again, both desk research
and experts’ opinions were of high importance. We consider the industrial
sector to be a case in our study and the firm as a sub-case. The choice of such
an approach was driven by the belief that this multilevel analytical design
allowed for a better understanding of the logic behind theoretical arguments
and to illustrate their validity.
We analyzed the internationalization strategies of 18 firms in seven
industrial sectors that include the largest presence of internalizing companies.
The sectors are oil and gas, metallurgy, banking, telecommunications,
automotive, construction, and IT. It is worth noting that while Russian MNEs
appearing in top global rankings operate in the oil and gas, metallurgy, and
banking industries, companies servicing mass clients in IT, telecommunica-
tions, automotive, and construction sectors implement internationalization
attempts on a smaller scale. In each of these sectors, we have selected two to

three firms for the firm-level analysis of internationalization strategies. The
selected companies are most often mentioned in the official reports and
research papers, by experts and practitioners, and in media as the prototypes
of Russian MNEs. Another argument is their top places in the national top
companies list Expert 400 which ranks Russian companies according to their
turnover (table 1).
Table 2 describes basic facts about selected companies such as name,
the year of establishment, turnover, and industrial sector. Also, table 2 indi-
cates information about the destinations of their expansion, main operation
modes, and the approach followed in the process of internationalization.
Prior to moving to the description of the results of empirical analysis, we
find it relevant to briefly discuss the main features of the Russian context.
The Russian Context

At the end of the 2000s, Russia had the second largest stock of direct invest-
ments abroad among the emerging economies (US$203 billion in 2008;
Panibratov and Kalotay 2009). The prototypes of Russian MNEs already
existed in the times of the Soviet Union (so-called Soviet multinationals or
TABLE 1 The Place and Turnover of Case Companies in Expert 400 Ranking, 2010
Turnover in 2009
Company Rank in 2010 Rank in 2009 (million US$)a
Gazprom 1 1 99,699.0
Lukoil 2 2 71,925.1
Rosneft 3 3 35,740.0
Sberbank 5 6 32,507.4
Sistema (owns MTS and Sitronics) 7 11 19,824.8
Severstal 10 8 13,803.0
VTB 11 17 13,110.0
Norilsk Nickel 14 13 10,737.2
Vimpelcom 17 20 9,201.9
Rusal 20 12 8,633.1
Alfabank 48 51 3,075.8
AvtoVAZ 49 25 3,068.1
KamAZ 76 46 2,029.8
LenSpezSMU 261 354 605.7
Stroimontazh 275 — 574.7
Kasperskyb — — 350 (approx.)
Yandexb — — more than 300
a
Due to the high ruble=U.S. dollar rate fluctuation in 2009 (from 27 to 33), we take 30 rubles=U.S. dollar to
calculate the turnover in U.S. dollars.
b
These two companies are not in the ranking and can be also estimated based on the open sources and
experts’ opinions.
Source: Expert 400, http://www.raexpert.ru/rankingtable/?table_folder=/expert400/2010/main1/; authors’
estimates.
TABLE 2 Description of Case Companies

Year of Turnover Main operation
Company establishment (million US$) Industry Foreign destinations modes Expansion approach
1. Gazprom 1989 99,699.0 Oil and gas Main: CIS, Baltic states, Export, turnkey projects, Policy-oriented; strategic-
Minor: Europe. In the joint ventures, wholly resource seeking.
2000s investments in owned subsidiaries Establishing partnerships,
Central Asia and move on trading with foreign
to Vietnam, Latin America companies and
and some Arab countries governments. Acquisition
of companies in highly
profitable distribution
segments
2. Lukoil 1991 71,925.1 Oil and gas Main: Europe, the USA, CIS, Export, turnkey projects, Market-oriented and
Baltic states, Rising joint ventures, wholly profit-seeking approach;
interest in Africa, Asia, owned subsidiaries cheap retail acquisitions
Latin America and some or franchising, strategic
Arab countries partnerships
169
3. Rosneft 1993 35,740.0 Oil and gas Main: CIS, Baltic states, Export, turnkey projects, Policy-oriented; strategic-
Minor: Europe, less joint ventures resource seeking.
developed economies Establishing partnerships,
trading with foreign
companies and
governments
4. Rusal 2000 8,633.1 Metallurgy Highly diversified presence Export, licensing, M&A for foreign expansion.
over the world (the US, acquisitions Avoids hostile deals,
Australia, the UK, China, trying to make
Japan and Singapore, agreements and
Europe, CIS, and Africa) compromises with the
partners
5. Severstal 1955 13,803.0 Metallurgy Highly diversified presence Acquisitions with very few Aggressive acquisitions of
over the world. Main exceptions (like licensing low performing
assets are in the US, the or greenfield) enterprises in the strategic
UK, Europe, CIS, and countries of CIS, Europe
Africa) and North America
(Continued )
TABLE 2 Continued
Year of Turnover Main operation

Company establishment (million US$) Industry Foreign destinations modes Expansion approach
6. Norilsk 1989 10,737.2 Metallurgy The diversified presence Mainly acquisitions Aggressive acquisitions in
Nickel over the world (with the the strategic markets
focus on the North abroad
America and South Africa)
7. Alfa-bank 1990 3,075.8 Banking Main: CIS, Minor: selected Subsidiary banks and Opening branches and
countries of Western representative offices subsidiaries. Quite a
Europe, the UK and the through the establishment conservative approach to
US of control under foreign expansion
companies
8. Sberbank 1991 32,507.4 Banking Relatively diversified Subsidiary banks and A conservative approach to
170
presence—CIS, Europe, representative offices expansion through
less developed through the establishment organic growth as a rule.
economies of control under foreign Take part in the strategic
companies deals on behalf of the
Russian state. Most active
in the countries that
actively trade with Russia
9. VTB 1990 13,110.0 Banking Main: CIS and Europe; Establishing subsidiaries A conservative approach to
Minor: African countries, expansion through
China, and Singapore organic growth and a
series of strategic
acquisitions. Most active
in the countries that
actively trade with Russia
10. MTS 1993 9,824.0 Telecom Main: CIS; India Acquisitions of market ‘Follow the customer’
leaders and strategic strategy
partnerships; more rarely
IJV and licensing
11. VimpelCom 1992 9,201.9 Telecom Main: CIS, Europe, and Asia. Acquisitions and strategic Expansion in various forms
Minor: Vietnam and partnerships; more rarely not only to CIS countries
Cambodia IJV and licensing but even further to Asia
and Europe
12. GAZ 1929 Automotive Main: CIS Has exported to more than Direct exporting.
30 countries within last 20 Subsidiaries abroad by
years; cooperation with creating dealerships and
Daimler Chrysler and uses them for marketing
Magna and selling its products
abroad
13. KamAZ 1969 2,029.8 Automotive Main: CIS. Minor: contracts Export, IJVs, and own Greenfield and joint
in other developing plants projects abroad with the
economies international
manufacturers
14. LenSpezSMU 1987 605.7 Construction Main: CIS Minor: Eastern Participation in joint Acquisition of plots for
and Southern Europe projects; subcontracting construction abroad
15. Stroimontazh 1994 574.7 Construction Main: CIS Participation in joint Acquisition of plots for
projects as a construction abroad
171
subcontractor
16. Kaspersky 1997 350 (approx.) IT Main: Europe and Asia Exporting; strategic Opening regional offices in
partnerships with the top European countries and
of the software industry; CIS
‘‘virtual’’ entry more than
physical
17. Sitronics 1997 1,000 IT Main: CIS and Eastern Strategic partnerships and Increasing exporting and
(approx.) Europe Minor: Middle vendor contracts servicing key customers
East, Africa
18. Yandex 2000 300 (approx.) IT Main: CIS ‘‘Virtual’’ entry and Acquisition of domains in
presence through mass foreign markets
customers’ interest
red multinationals), and the country exercised strict control over these compa-
nies, which were all state-owned. A majority of these firms were involved in
supporting Russian exports abroad (raw resources marketing, infrastructure
support, banking, insurance, etc.). After the collapse of the Soviet Union in
the early 1990s, these companies were mostly involved in the restructuring
and consolidation of assets inside the country; only after having gained enough
power did they start to demonstrate an interest for international expansion.
The second wave of the internationalization of Russian firms started at
the end of the 1990s, with cross-border mergers and acquisitions (M&As)
being the most popular form. However, there were also large greenfield
projects and brownfield deals. Compared to cross-border M&As, greenfield
projects conducted by Russian firms were smaller in both size and scope
(Kalotay and Sulstarova 2010).
The variety of motives explains Russian OFDI with the dominating

incentives referring to the search for markets and resources (Vale Columbia
Center 2009). Yet, such a drive as seeking strategic assets, image building, or
insurance motives are also among the important reasons. The desire of man-
agers and private equity owners to mitigate the economic and political risks
in their home market by holding assets offshore (a variety of post-transition
‘‘capital flight’’) related to ‘‘system escape’’ motives, which decreased sharply
after 1999 but bounced back during the global crisis. Aspirations for a better
global recognition and an improved image abroad have also been among the
driving force of Russia OFDI (Panibratov and Kalotay 2009).
The destinations of companies cover both developed countries and
other emerging economies in which Russian firms encounter problems of
underdeveloped infrastructure and distribution networks. Exposed to these
challenges and having grown in an unstable economic environment, Russian
companies have become resilient to shocks and more flexible in their devel-
opment paths. The majority of the internationalizing companies are ultimate
leaders in the domestic market with first places in the top national firms’ lists
(list of Expert 400).
The international expansion of Russian firms is closely connected with
reforms implemented during the last two decades: Privatization and attempts
to implement industrial restructuring to catch up with technological develop-
ments are among the most important. Sector development has not been equal.
The state has selectively supported some industries and left others without
incentives and possibilities for growth. In Russia, mass privatization has
led to only a gradual transformation of production networks. The core ‘‘tech-
nology’’ of privatization was the ‘‘corporatization’’ of large and medium-size
enterprises by converting them into joint stock companies prior to their
restructuring. The aim was to make enterprise independent of state adminis-
tration, delimit the size of its ownership, and separate shareholders from
management. In the privatization program, large and medium-size enterprises
have played the major role.
The state has played an important role in the emergence of Russian

OFDI. State-owned enterprises possess a set of advantages (financial capabili-
ties, access to loans from the central bank, administrative support, etc.) that
facilitate their internationalization. At the same time, even in fully or partly
privatized enterprises, state influence remains—sometimes directly (for
example, through residual ownership) and sometimes indirectly—ignificant.
However, the state influence varies across industries. It is particularly strong
in the energy sector but takes only indirect form in others through incentiviz-
ing their development.
Empirical Analysis
This section presents the results of our empirical analysis. First, we concen-
trate on the assessment of the industry-specific determinants affecting firms’

behavior and define several groups of sectors with similar characteristics.
Then we analyze whether internationalization strategies of firms in those
sectoral groups follow a specific common pattern and the reasons for the
existence of cases deviating from these patterns.
INDUSTRY-SPECIFIC DETERMINANTS SHAPING INTERNATIONALIZATION PATTERNS

As described in the previous sections, there are several important industry-
level determinants that influence the patterns of various types of activities
of firms in a given industrial sector, including those with regard to inter-
national expansion. Next, we describe main determinants of industries
included into the study.
In the oil and gas industry, the natural resources are the key assets that
underlie the competitiveness of firms. Due to their scarcity, the nature of com-
petition is oligopolistic: Only a few large companies exist. The strategic nature
of such resources as oil and gas results in the high degree of state involvement
in the total range of firms’ activities, which represents, perhaps, one of the
most distinctive features of this industry. The government has a stake in
almost all companies—through direct ownership or by influencing them via
representation in boards of directors, setting regulations, and providing the
licenses. This is, undoubtedly, the strongest institutional factor that influences
the companies in the industry. The requirements for capital are very high due
to the very complicated, diversified, and expensive infrastructure for the
exploration, production, refining, and transportation of the oil. The technical
side of this industry is sophisticated and the role of technology is also high.
In metallurgy, similar to the oil and gas industry, the competitiveness
depends on access to natural resources such as different types of ore. The
requirements for the infrastructure and technology are high, which affects
the location choice of the companies. Although the number of players in the
industry is relatively small, the intensity of competition is high, and companies
are less dependent on state influence than those in the oil and gas industry.
The market itself is highly stable due to the strong position of several oligopo-
lies, which are relatively equally treated by the government.
In banking, the scale of operations of major players is considerably large,
which explains the reason for the presence of a small number of big Russian
banks holding large market shares. However, the competition among these
few players is high, which leads to a rise of their interest in foreign activities.
The technology used in the banking sector is neither as sophisticated as in
case of high tech nor expensive, as in the oil and gas sectors. Also, the
implementation of operations does not require large and capital intensive
infrastructure. The Russian government plays a supervisory role in both dom-
estic and foreign operations due to the fact that they often represent interests
of the state in financing foreign deals.
In telecommunications, the market is oligopolistic and is principally

shared among a few players. At the same time, the infrastructure expendi-
tures are very high and, when aiming to get the technological leadership,
the companies have to compete for innovations—both technical and mana-
gerial. Telecommunication companies are required to undertake relatively
high investments in R&D and technological development. The government
involvement is moderate and is mostly explained as an ability of domestic
players to invest in the home country infrastructure through the backward
transfer of Western technologies to Russia.
In the automotive industry, the capital and infrastructure requirements
are high. Firms need to continuously undertake R&D activity to stay competi-
tive, which forces them to cooperate domestically and internationally. This
sector was one of the first in Russia that witnessed a large amount of inward
FDI. The role of the government is controversial in the context of Russian
automakers. On the one hand, providing foreign firms with incentives to
invest into the domestic market, the Russian state undermines the opportu-
nities for development of the domestic industry, which requires technological
modernization. On the other hand, there are also attempts to attract foreign
investors and to motivate them to transfer technological knowledge through
the establishment of various types of cooperative ventures with Russian
companies.
In the construction industry, the capital requirements and infrastructure
needs are small, and R&D intensity is relatively low. The domestic competition
is fierce, and many construction firms from Russia go abroad to secure their
home operations. The Russian government is not directly involvedneither in
the domestic or the foreign operations of companies. Despite the low role
of the state, institutional factors influence the industry through the provision
the standards and the requirements which define the firms’ operations.
In the IT sector, in Russia the typical player is a privately owned small
company. Domestically, these firms can benefit from servicing the govern-
ment organizations and being in close cooperation with them. While in certain
cases R&D expenditures can be very high, no substantial financing is required

in this sector. Human capital and innovation represent the cornerstones. The
competition in the IT sector is intensive, which pushes the firms toward
cooperative behavior with one another. The government is not involved in
the direct regulation of this sector with the exception of those cases in which
companies are taking part in state programs (primarily R&D and innovations-
related). It is of note that one of the serious problems in the high tech sector is a
lack of macro-level institutions influencing the activities of Russian companies
(e.g., weak property rights regulation, which undermines their competitive
development).
This description aims to illustrate that the patterns of operations in the
above-mentioned sectors could be differentiated according to two
important dimensions: (1) the role of the state and (2) capital and infra-
structure requirements. We suggest classifying Russian internationalizing

industries on the basis of these two dimensions in four groups, as shown
in table 3.
Table 3 shows that Group 1 is occupied by the oil and gas industry in
which both state influence and capital and infrastructure requirements are
high. Group 2 includes the banking sector and is characterized by high state
influence but relatively low capital and infrastructure needs. Group 3 com-
bines metallurgy, telecommunications, and the automotive sectors as they
are not exposed to direct state influence but have large capital and infrastruc-
ture requirements. The last group (4) includes IT and the construction
industries in which neither state influence nor capital and infrastructure
requirements are high.
Next we examine whether in each of the groups’ firms there follows a
certain pattern of international expansion, as we suggested in the theoretical
development.
TABLE 3 Sectoral Groups

Infrastructure intensive
State
control Yes No
High (1) Oil and gas. In this industry the state (2) Banking. The state closely
strictly controls the operations of the supervises the banks’ activity,
companies. The capital requirements whereas infrastructure is not
are extremely high due to the required. However, the capital
complications and extent of requirement can be relatively high to
infrastructure. assure growth.
Medium- (3) Telecommunications, metallurgy, (4) IT, construction. The state is
Low automotive. The government does not involved in these firms’
not directly control firms’ operations operations. Capital can be minimal to
in these sectors, but the capital and allow these firms to support growth.
infrastructure requirements are high.
INTERNATIONALIZATION PATTERNS
As it was proposed in the theoretical framework, the similar industry-specific
determinants are expected to pre-define the patterns of internationalization
strategies. The analysis of internationalization strategies of Russian firms
shows that, indeed, this argument has an empirical validity, and there are
clear patterns of internationalization strategies pursued by companies in each
of the distinguished sector groups represented in table 3.
Group 1: oil and gas. The pattern of international expansion depends
on the industry’s characteristics in a rather straightforward manner. As it is
characterized by scarce oil and gas reserves, there simply is no space for
establishing new businesses via greenfield investments. The expansion takes
place primarily through brownfield investment with the aim of transferring
Russian firms’ assets to foreign ones to expand the distribution networks even
further and, in return, to gain technologies, know-how, and sales revenues to

the home country. With the acquisitions, joint ventures, and cooperation
agreements, these companies exploit the already existing frameworks when
doing business internationally. As one of the respondents points out:
There are only very few options available for our international expansion in
terms of strategy. The scale of operations, resource-requirements and polit-
ical considerations put serious limits on the choice of how we grow abroad.
Group 2: banking. The process of penetrating a new market usually

begins with the establishment of a representative office that evaluates the
market and discerns whether it possesses any potential for business and
the suitable time for entry on a larger scale. Once the decision to stay in a
particular market is made, banks attempt to expand by acquiring the existing
competitors. Most of the foreign operations of Russian banks have been car-
ried out through several subsidiaries located across the world. Expansion
destinations abroad are evaluated on the basis of the existence of the poten-
tial target markets for banks’ customers (custom-following). The representa-
tive of large Russian bank said,
We are rather careful when opening an office abroad; we try to establish

ourselves somewhere in the middle of the neighboring states where our
potential customers may be locates in, but in the most convenient and
safe market amongst these countries.
Expanding the markets (market seeking) is another important incentive for

companies in this group. Another interviewee from this sector points out,
Generally, we prefer following our largest clients who go abroad,

especially if they enter CIS; meanwhile, we are interested in all customers
who may become our customers in the (long-term) perspective.
Group 3: metallurgy, telecommunications, and automotive. A takeover

by firms in these industries’ companies in less-developed economies is part
of the strategy aimed at accessing these countries’ markets and infrastructure.
Indeed, as high and highly specific infrastructure requirements limit the
opportunities for companies to grow organically, M&As have been the fastest
and most efficient way of growth for Russian firms in these sectors. As one of
the managers in automotive company comments,
The joint venture is much easier for us to establish, but it gives us nothing
in terms of the competitiveness in new market. We have to take over
other firms even if they are not perfect target, but are well positioned
in the foreign market.
The duality of the state role became clear in the internationalization of compa-
nies in these industries. First, the government exploits the foreign acquisitions
made by Russian firms as a tool for the diversification of nationally important
assets internationally. Second, the state benefits from the increase of the con-
trol over other economies through these deals. So, the growth across national
borders is led by the economic considerations of firms and of the state. Several
respondents noticed that the government role in the internationalization is
huge. Human resources and R&D are also of importance, which lead to motiv-
ation for the choice of acquisition targets. This logic is well reflected in the
response of top manager of the telecom firm: ‘‘We strive to cover as large space
as possible. We know we can do it with our R&D capabilities, and we attempt
to become a leader in the most of CIS countries in the nearest future.’’
Group 4: IT and construction. Though there is no clear pattern for the
modes of operation that vary greatly in different countries, these industries
adopt a similar logic pursuing emerging opportunities to expand to new mar-
kets by following their existing clients or by exploring partnerships to
strengthen their capabilities. The majority of these firms are medium-size
firms, and they strive to occupy the niches where they can grow, exploiting
their existing competitive capabilities. One director of a Russian software
company said, ‘‘We compete with products in narrow niches where we have
developed top competences.’’
The other respondent from a construction firm based in St. Petersburg
indicates well the logic behind the internationalization strategy of this sector:
We know that Russians love Bulgaria—there is Black [S]ea, the climate is

wonderful, they [Bulgarians] are partly Russian-speaking, share similar
values and memories of the past. That’s why we build there—houses,
hotels, apartments—everything that can be sold to Russians.
The summary of these internationalization strategies’ patterns is reflected in

table 4.
TABLE 4 Patterns of Internationalization Strategies

Technology and capital intensive
State
control Yes No
High (1) Oil and gas. Alliances and IJVs (2) Banking. The representative
are preferred as they give the offices are the most common
companies the chance to form of first entry. Acquisitions
integrate themselves in the are made when the foreign
global industry. Significant market is approved as the
initial investments in the joint prospective one. The economic
projects help to overcome the motives dominate, despite that
high entry barriers (due to the real role of the Russian
expensive infrastructure and government is much greater than
technologies). The political the one which is perceived by
motives often dominate over host markets’ institutions.
economic ones. The expansion Through representative offices

is aggressive and the scale of they move slowly into foreign
acquisitions is huge. markets.
Low (3) Metallurgy, (4) IT, construction. The
telecommunications, and partnerships are the most
automotive. Acquisitions are the common form of both entry
most common form of strategy and post entry
international expansion. In most operations. The financial risks are
cases M&A are the only possible relatively low in the process and
form due to the high internationalization occurs
requirements of infrastructure through the various types of
and the lack of capacity to projects following the logic either
create this from scratch and on following the market or the client.
their own. The role of the state In some cases the IJVs help to
is moderate and companies are strengthen the innovations and
independent and possess large R&D capabilities of the firms.
capital. They are not interested There are almost no political
in control and backup of their motives in the
operations and they tear their internationalization in this group
targets especially if the latter are of firms. They often follow other
attractive. large firms in their international
expansion and are not aggressive.
However, despite the existence of these patterns indicating the presence

of common logic in the internationalization strategies of the companies in the
distinguished groups, the empirical evidence shows that there are also com-
panies following deviating strategies due to their specific characteristics.
Next, we discuss the examples of these companies for each of the groups
and emphasize the reasons for their distinctive behavior.
The Role of Firm-Specific Factors in Internationalization Strategies

In the oil and gas group, the deviating company is Lukoil (see table 2). If the
rest of the companies in the group—Gazprom and Rosneft—are state-owned
and bending competition toward an inefficient position in the Russian oil and
gas industry in general, Lukoil is operating in a manner of a profit-seeking

company in this market. Its core activities—marketing and refinery—
are less state-controlled than activities of other players (production and
exploration), which explains the requirement for higher profit margins.
The main firm-specific deviating factor is the stronger focus on profitability
due to the lesser dependence on the state.
In the banking group, the deviant is Alfa-bank, which is established as
part of a business group. Although this bank enjoys strong support from the
government, its international expansion is to a larger extent profit and market
seeking than other internationalizing Russian banks. Alfa-bank was the first
Russian bank with huge non-state capital.
In the metallurgy, telecommunications, and automotive group, the
deviating company is Severstal (metallurgy). While most of the firms in the
industry are focusing on the acquisitions of emerging market companies,

especially in locations where the necessary raw materials for their business
are located (backward internationalization), Severstal has aggressively under-
taken risky forward acquisitions in developed countries (in the EU and
United States, in particular), which allowed the company to get close access
to customers and to overcome the trade barriers, tariffs, and duties.
In the IT and construction group, the deviant is Sitronics (IT), which has
been in close cooperation with the Russian government aiming to ensure
support allowing for its successful development. This cooperation stimulates
other large companies controlled by the state to fund Sitronics’ R&D activi-
ties, which is crucial for competitiveness in the IT industry. It could be argued
that a unique position of this company is explained by the proximity to the
state and by the servicing of the government-related contracts and projects.
DISCUSSION
The empirical results support the view that internationalization strategies of

EMFs are shaped by institutional, industry and firm-level determinants when
sector-specific determinants affect the emergence of certain strategy patterns
being modified according to specific resources and capabilities available to
individual firms. Indeed, as table 4 presents, there is a common logic behind
the internationalization strategies of firms operating in similar types of
industries being classified according to such sector-specific and institutional
determinants as state influence and capital and infrastructure requirements.
This argument emphasizes the fact that the role of macro-institutions in
transition economies is particularly evident at industry level when it strongly
affects the competition rules, technology standard, and resources for innova-
tive development and the priorities for growth.
The empirical results inductively derived on the basis of the literature
analysis support Propositions 1 and 2 that sector-specific factors being
strongly affected by the macro-level institutions to a large degree pre-define

the patterns of internationalization strategies of firms in sectors. This
conclusion has an important implication for the EMFs’ field, as it enables
comprehending the reasons why firms’ strategies originating from a single
national context differ and suggests an approach for the analysis of these
differences. Indeed, if scholars are aiming to understand the distinctive nat-
ure of strategies of EMFs, they should incorporate industry-level factors and
compare the strategies within or across different industries rather than within
or across various national contexts, be it emerging economies or developed
countries. These findings provide a support for the premises of the ‘‘external
control’’ perspective adopted from the strategy research and encourage the
development of more ‘‘fine-grained’’ approaches to the incorporation of
various external factors into analysis for the better understanding of the
nature of internationalization strategies of EMFs.

The empirical research illustrates the validity of the argument that firm-
specific resources and capabilities could result in deviation in firms’ behavior
from patterns pre-defined by the industry-specific factors. The existence of
firms whose strategies differ from the common pattern is in line with our
theoretical assumption about the role of firm-level determinants and direct
relationships with government and supports the validity of the ‘‘strategic
choice’’ perspective. In particular, there might be deviation either in terms
of structural differences of strategy elements or in the scale of implementation
of the internationalization strategy. For example, firm-specific determinants
can influence the number of foreign markets chosen for the expansion, the
speed of the expansion, or the performance outcomes of the internationaliza-
tion. Overall, it could be argued that Propositions 3 and 4 reflect the experi-
ence of Russian internationalizing firms.
CONCLUSION
This article examines determinants of internationalization strategies of EMFs.

It reveals the gaps in the existing literature and aims to address these gaps by
suggesting a theoretical framework explaining the combined influence of
institutional, sector- and firm-level determinants in shaping the internationa-
lization strategies of EMFs. It validates this framework using the empirical evi-
dence from 18 Russian internationalizing firms from seven industrial sectors.
This article has a number of theoretical contributions. First, it attempts to
illustrate the value of multilevel research of emerging market literature
by integrating macro- and firm-level determinants and including industry-
specific determinants that allow for more comprehensive conclusions. This
approach enables for a better understanding of the variety of EMFs’ strategies
and of accounting for complex forces of the global business environment.
Second, it provides a better understanding about the role of institutional
influence at industry and firm levels. With reference to the debate about the
distinctive nature of EMFs’ strategies, we stress that scholars need to differen-
tiate more systematically between the existing approaches to internationaliza-
tion strategies with the objective of explicitly addressing the variety in these
approaches.
The article also has value for managers as it enhances their awareness
about the complexity of forces and determinants influencing the international
expansion and their origin. It provides a practical tool for modeling their
strategy formation and accounting for different types of determinants in a
more informed manner.
We encourage scholars to continue working in this direction and to
verify the value of this approach by, for example, undertaking a more
detailed examination of the process of strategy making by EMFs. Indeed,
strategy research in the emerging market context is still limited, and the issue
raised in the classic literature—whether the organizational factors shape the
process more than the external environment—is particularly important and
complex in this context.
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Determinants of Internationalization Strategies of Emerging

Article in Journal of East-West Business · April 2012

Irina Mihailova Andrei Panibratov

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Graduate School of Management, St. Petersburg University, St. Petersburg, Russia

Recently, debates about uniqueness of emerging market firms’

KEYWORDS emerging market firms, internationalization, Russia

The phenomenon of international expansion of emerging market firms

Received February 27, 2012; accepted July 4, 2012.

sectors. We consider ‘‘industrial sector’’ as a ‘‘case’’ to verify whether the firms

THEORETICAL UNDERPINNING OF INTERNATIONALIZATION

The internationalization strategies of EMFs came into the focus of scholarly

influence on patterns of investments from emerging economies, while the

FIGURE 1 Theoretical framework (color figure available online).

Proposition 1: Sector-specific determinants such as market, capital,

MACRO-LEVEL INSTITUTIONAL DETERMINANTS

is a strong influence of institutional factors on sector-specific determinants

Proposition 2: Sector-specific determinants that shape the patterns of

Despite the importance of the above-mentioned sector-specific and

Proposition 3: Firm-specific resources and capabilities affect the success

INSTITUTIONAL DETERMINANTS AT THE FIRM LEVEL

coercive, mimetic, and normative pressures on firms to appear legitimate and

Proposition 4: There are specific macro- and micro-level institutional

THEORETICAL MODEL: TOWARD SYNTHESIS

To summarize, we argue that the internationalization strategy of EMFs

METHODOLOGY AND DATA

To provide an empirical support for an inductively developed theoretical

nalization strategies of Russian companies in those industrial sectors that

attempts on a smaller scale. In each of these sectors, we have selected two to

The Russian Context

TABLE 2 Description of Case Companies

Year of Turnover Main operation

The variety of motives explains Russian OFDI with the dominating

The state has played an important role in the emergence of Russian

trate on the assessment of the industry-specific determinants affecting firms’

INDUSTRY-SPECIFIC DETERMINANTS SHAPING INTERNATIONALIZATION PATTERNS

In telecommunications, the market is oligopolistic and is principally

cases R&D expenditures can be very high, no substantial financing is required

structure requirements. We suggest classifying Russian internationalizing

TABLE 3 Sectoral Groups

further and, in return, to gain technologies, know-how, and sales revenues to

Group 2: banking. The process of penetrating a new market usually

We are rather careful when opening an office abroad; we try to establish

Expanding the markets (market seeking) is another important incentive for

Generally, we prefer following our largest clients who go abroad,

Group 3: metallurgy, telecommunications, and automotive. A takeover

We know that Russians love Bulgaria—there is Black [S]ea, the climate is

The summary of these internationalization strategies’ patterns is reflected in

TABLE 4 Patterns of Internationalization Strategies

economic ones. The expansion Through representative offices

However, despite the existence of these patterns indicating the presence

The Role of Firm-Specific Factors in Internationalization Strategies

gas industry in general, Lukoil is operating in a manner of a profit-seeking

industry are focusing on the acquisitions of emerging market companies,

The empirical results support the view that internationalization strategies of

strongly affected by the macro-level institutions to a large degree pre-define