Springboard Theory
The springboard theory or springboard perspective is an international business theory that elucidates the unique motives, processes and behaviors of international expansion of emerging market multinational enterprises. Springboard theory was developed by Luo and Tung, and has since been used to examine EM MNEs. At the core of this theory is the argument that EM MNEs systematically and recursively use international expansion as a springboard to acquire critical resources needed to compete more effectively against their global rivals at home and abroad and to reduce their vulnerability to institutional and market constraints at home. These efforts are systematic in the sense that “springboard” steps are deliberately designed as a grand plan to facilitate firm growth and as a long-range strategy to establish more solidly their competitive positions in the global marketplace. They are also recursive because such “springboard” activities are recurrent and revolving.
Unique motives
According to Luo and Tung, EM MNEs use international expansion as a springboard to compensate for their competitive disadvantages, overcome their latecomer disadvantage, counter-attack global competitors’ major foothold in their home country market, bypass stringent trade barriers into advanced markets, alleviate domestic institutional and market constraints, secure preferential treatments from home governments, and exploit competitive advantage in other emerging and developing countries. In so doing, EM MNEs overcome their latecomer disadvantage in global competition via a series of aggressive, radical, risk-taking foreign direct investment measures by proactively acquiring or buying critical assets from mature, often Western-based MNEs to compensate for their competitive weaknesses. EM MNEs are both asset seeking and opportunity seeking.Thus, unlike Western MNEs who are generally motivated to go global to exploit their ownership-specific capabilities they have already possessed, EM MNEs go global to acquire strategic capabilities they do not have but critically needed to upgrade their capability portfolio in search for competitiveness in global competition. In contrast to newly industrialized economy MNEs whose international expansion has been largely triggered by “push” factors such as appreciating currencies, rising labor costs and shortages, escalating operating costs, and smaller home markets, EM MNEs’ global expansion has been driven mainly by “pull” factors such as securing critical capabilities and resources, circumventing host country trade barriers, upgrading home-market capabilities, and seeking international reputation.
Strategic behaviors
EM MNEs uniquely use their inward FDI experience and networks at home before aggressively undertaking outward FDI. Through inward internationalization, EM MNEs have accumulated some experience and absorptive capabilities dealing with international competition, deepening their understanding of international markets before conducting outbound FDI.More evidently, there are several leapfrog trajectories to mirror EM MNEs’ springboard behaviors. First, they tend to internationalize very rapidly and not in an incremental fashion as predicted by conventional internationalization process theory. As global latecomers, EM MNEs accelerate their pace of internationalization so as to catch up with that of incumbents. Large EM MNEs rapidly expand internationally through high-risk, high-control entry modes such as big acquisitions and greenfield investments. Second, EM MNEs tend to be radical in their choice of location, showing a pattern of path departure from cultural, institutional, economic and geographical distances. Very often, they first venture into advanced markets. Third, EM MNEs’ initial commitment tends to be large and does not necessarily involve many small steps. Also, departing from the conventional wisdom of control, EM MNEs tend to use localized senior management team, rather than parent country nationals.