Multinationals in the Middle East: Challenges and opportunities

doi:10.1016/j.jwb.2010.10.001

Journal of World Business

Volume 46, Issue 4, October 2011, Pages 406-410

https://doi.org/10.1016/j.jwb.2010.10.001 Get rights and content

Abstract

This introduction to the special issue on Multinationals in the Middle East first reviews the historical growth and development of multinational enterprises (MNEs) in the territory extending from Morocco to Turkey alongside the southern and eastern shores of the Mediterranean as far east as Iran, and south to Sudan and Yemen. Then, several opportunities and challenges affecting MNEs in the region are discussed, including economic and social diversity, non-market strategies and entry-mode choices, and animosity toward MNEs. The seven papers featured in the special issue that address these topics are then discussed.

Section snippets

Economic and social diversity and FDI in the Middle East

The Middle East is a highly diverse region. Diversities in the region do not end with languages, ethnicities and religions. Countries in the region also have a diverse range of political and economic systems. Although Ali, 1995a, Ali, 1995b describes most Middle East economic systems as sheiko-capitalism, in which he examines several variation of this model, some of the countries in the region may not necessarily be classified within the sheiko-capitalist pattern (Budhwar & Mellahi, 2007). For

Non-market strategies and entry mode

Whereas MNEs in the 1980s entered into Middle Eastern countries primarily to acquire natural resources and low-cost factors, the remarkable rise in income in some parts of the region has recently attracted market-seeking MNEs. Some MNEs, such as American computer chip manufacturer, Advanced Micro Devices (AMD), South Korea's LG Electronics, and China's white goods powerhouse, Haier, have set up manufacturing operations in the region. World famous multinational retailers also have established

MNEs and animosity in the Middle East

As noted earlier, MNEs operations in the Middle East are fraught with pitfalls and tensions, partly because they are often entangled in international and political affairs. In particular, conflicts and wars in the Middle East create considerable challenges for MNEs operating in the region. Among the notable challenges is animosity towards products made in western countries or by western MNEs. Animosity is the “remnants of antipathy related to previous or ongoing military, political, or economic

The special issue

The special issue consists of seven papers. The special issue contains one article about FDI performance, one article on internationalization and modes of entry, one article on business groups, one article on marketing, two articles on human resource management by MNEs, and a final paper on crisis management by MNEs in the Middle East. Each of the pieces in this special issue makes an important contribution to our knowledge on MNEs in the Middle East.

The opening paper by Demirbag, Apaydin, and

References (43)

L.S. Amine
Country-of-origin, animosity and consumer response: Marketing implications of anti-Americanism and Francophobia
International Business Review
(2008)
M. Bahaee et al.
Iranian consumer animosity and U.S. products: A witch's brew or elixir?
International Business Review
(2009)
M. Demirbag et al.
Institutional and transaction cost influences on MNEs ownership strategies of their affiliates: Evidence from and emerging market
Journal of World Business
(2007)
A. Ahmed
Achieving business excellence and competitiveness in the MENA region
A. Ali
Cultural discontinuity in Arab management thought
International Studies in Management and Organization
(1995)
A. Ali
Middle East competitiveness in the twenty-first century's global market
Academy of Management Executive
(1999)
A.J. Ali
Preface: Management in a sheiko-capitalist system
International Studies of Management and Organization
(1995)
S. Andersen
Building for the Shah: Market entry, political reality and risks in the Iranian market: 1933–1939
Enterprise & Society
(2008)
M. Apaydin
Analyzing FDI trends in emerging markets: Turkey vs CSEE and the Middle East
International Journal of Emerging Markets
(2009)
Armbruster, S. (2002). Amazon Denies Backing Israel, BBC News, November...

R.L. Blaszczyk

Synthetics for the Shah: DuPont and the challenge to multinationals in 1970s Iran

Enterprise & Society

(2008)

Bowers, S. (2001). Protests force Sainsbury out of Egypt with £125m Loss. The Guardian, April...

P. Budhwar et al.

Introduction: Human resources management in the Middle East

The International Journal of Human Resource Management

(2007)

D. Dasgupta et al.

Reform and elusive growth in the Middle East: What has happened in 1990s? World Bank, Middle East and North Africa Working Paper Series, No. 25

(2002)

M. Demirbag et al.

Dimensions of European direct investments activity in Turkey: Patterns and prospects

International Journal of Emerging Markets

(2007)

A. Fiegenbaum et al.

Which firms expand to the Middle East: The experience of U.S. multinationals

Strategic Management Journal

(1997)

Fisk, R. (2002). Starbucks the target of Arab boycott for its growing links to Israel. The Independent, June...

A. Godley et al.

Editors’ introduction: Business history and the Middle East: Local contexts, multinational responses

Enterprise & Society

(2008)

G.H. Hanson et al.

Expansion strategies of U.S. multinational firms

M.A. Hussein

Impacts of foreign direct investment in economic growth in the Gulf Cooperation Council (GCC) countries

International Review of Business Research Papers

(2009)

Cited by (81)

Branding and positioning strategies in industrial and B2B markets in the Middle East or Africa (MEA)
2024, Industrial Marketing Management
The effects of business- and non-business-targeting terrorism on FDI to the MENA region: The moderating role of political regime
2022, International Business Review
This study investigates the effects of terrorist attacks on foreign investment by stressing the importance of both business- and non-business-targeting terrorism in the host country. Building on North’s strand of institutional theory, we argue that both forms of terrorism represent exogenous risks likely to generate high levels of non-ergodic uncertainty for MNEs and subsequently deter foreign investors. Further, we hypothesize that these effects may be moderated by host-country political regime type, which serves as a gauge for a favorable investment environment for MNEs operating in institutionally fragile markets. Using panel data on fifteen MENA countries over the period 2001–2018, we find empirical support for our hypotheses whereby hybrid political regimes, namely anocracies, strengthen the negative effects of both business- and non-business-targeting terrorism on FDI. Our work contributes to the research on FDI and exogenous risks by offering a more fine-grained conceptualization of terrorism, as well as by highlighting the moderating role of host-country hybrid regimes.
How do international joint ventures build resilience to navigate institutional crisis? The case of a Tunisian-French IJV during the Arab-Spring
2021, Journal of Business Research
This paper aims at examining how the partners in an international joint venture (IJV) can build resilience through the implementation of new ex-post governance mechanisms for the navigation of an institutional crisis. The empirical results from a case study of an IJV located in Tunisia, formed by a French multinational and a Tunisian partner engaged in manufacturing dairy products show that the creation of ad hoc structures, the strengthening of the partners’ commitment and the emergence of transitional leadership ensured the survival and continuity of the IJV during an institutional crisis.
We make two main contributions. First, we outline the ways in which an IJV can build organizational resilience by implementing effective governance mechanisms for the navigation of an institutional crisis. Second, we contribute to understanding the MENA (Middle East and North Africa) region, by exploring the consequences of the Arab Spring on the business environment and the countries’ institutions.
Micro-foundations of organizational design and sustainability: The mediating role of learning ambidexterity
2021, International Business Review
Citation Excerpt :
Besides experiencing the so-called “natural resource curse”, other contextual factors such as underdeveloped financial markets, culture conflicts, deficient economic and political systems have often curtailed the pace and distribution of economic development (Budhwar & Mellahi, 2006; Budhwar & Debrah, 2013, 2007; Mellahi, Demirbag, & Riddle, 2011). In addition to these, lack of privatization and deregulations coupled with the dominance on the oil sector are seen as barriers to entrepreneurial development (Budhwar & Mellahi, 2007; Mellahi et al., 2011). It is important to note that the contemporary shift in many countries in the region towards human resources development with substantial investments in education and training has helped to put the nations and the region on a stronger footing for the future (see also Budhwar & Mellahi, 2006).
This paper builds on prior scholarly works by examining the relationship between organizing paradox (formalization and decentralization), and organizational levels of learning paradoxes, i.e. exploration and exploitation, and firms’ outcomes (organizational creativity, organizational resilience and organizational energy). Using data from 98 executives and 325 senior employees working across a diverse range of firms operating in the Middle East, the findings suggest that organizing paradox (formalization and decentralization) has a positive impact on learning ambidexterity. In addition, we also found that learning ambidexterity has a positive impact on both organizational resilience and organizational energy. Furthermore, the results indicate that learning ambidexterity mediates the relationship between organizing paradox and organizational creativity. These findings provide important insights into the micro-foundation aspects of organizational ambidexterity.
Positioning strategies of foreign and indigenous firms in an African cultural milieu
2020, Journal of Business Research
Citation Excerpt :
Consistent with extant literature, in this study, we use the term “Africa” interchangeably with sub-Saharan Africa and aim to represent black Africans south of the Sahara (see Ibeh & Debrah, 2011). Thus, for the purposes of this research, we exclude the Arab countries of North Africa that are often identified with the Middle East (Mellahi, Demirbag, & Riddle, 2011). In the next sections of the article, as a backdrop to the study, we discuss the conceptual background encompassing taxonomies of cultural patterns and the concept of positioning.
Despite the pivotal role of positioning in marketing strategy formulation, few studies explicitly examine positioning strategies employed by foreign and indigenous firms operating in the same cultural milieu. Relying on the concepts of culture and positioning as the backdrop, this research contributes to the literature by answering two key research questions: What are the differences between African indigenous firms' and Africa-based foreign firms' pursuits of positioning strategies? And is a Western-developed typology of positioning strategies applicable in an African cultural milieu, and more specifically, in the Ghanaian cultural environment? The results of the study demonstrate that indigenous and foreign firms replicate each other's positioning strategies to carve out positions, although foreign firms aggressively pursue a wider range of strategies than indigenous firms. While there is a uniform attempt by indigenous and foreign firms to reach the mass-market and lower- to middle-class target audiences, foreign firms focus more on middle-class audiences than do indigenous firms. The authors discuss implications for marketing theory and practice.
Management research in the Arab World: What is now and what is next?
2020, Journal of International Management
Citation Excerpt :
Within the scope of our sample in both time frame and journal quality, no other studies looked at the entry or exit rates of firms in the Arab world, despite the anecdotal evidence of shifts in foreign investment activity and increased exits by firms, particularly since the Arab Spring. Although entry mode decisions can be divided into three main categories – export, contractual and investment (Bradley, 2004; Meyer and Nguyen, 2005) – Mellahi et al. (2011) report that in Arab countries international firms mostly used franchising and joint ventures, with fully owned affiliates being the least popular. Regarding future research avenues, to date, more questions than answers remain in this key area of management literature.
Given the significant political and socio-economic transformations occurring in the challenging yet under-researched Arab world nowadays, this study seeks to (1) systematically review the literature in the leading mainstream management journals; and (2) develop a future research agenda that would enhance our understanding of the region. To do this, we conducted a systematic review of 176 published management studies (2000–2016). Our thematic analysis revealed three overarching themes. These were (1) avenues for economic development and improved performance, (2) leveraging and adapting to changing local institutional contexts and (3) overcoming legitimacy concerns/barriers in the Arab world. Our recommendations on the future research agenda of these themes were intended to provide key insights for researchers and managers interested in proactively contributing to the development of a timely research agenda for these promising markets.

View all citing articles on Scopus

View full text

Multinationals in the Middle East: Challenges and opportunities

Abstract

Section snippets

Economic and social diversity and FDI in the Middle East

Non-market strategies and entry mode

MNEs and animosity in the Middle East

The special issue

International Business Review

International Business Review

Journal of World Business

Achieving business excellence and competitiveness in the MENA region

Cultural discontinuity in Arab management thought

International Studies in Management and Organization

Middle East competitiveness in the twenty-first century's global market

Academy of Management Executive

Preface: Management in a sheiko-capitalist system

International Studies of Management and Organization

Building for the Shah: Market entry, political reality and risks in the Iranian market: 1933–1939

Enterprise & Society

Analyzing FDI trends in emerging markets: Turkey vs CSEE and the Middle East

International Journal of Emerging Markets

Synthetics for the Shah: DuPont and the challenge to multinationals in 1970s Iran

Enterprise & Society

Introduction: Human resources management in the Middle East

The International Journal of Human Resource Management

Reform and elusive growth in the Middle East: What has happened in 1990s? World Bank, Middle East and North Africa Working Paper Series, No. 25

Dimensions of European direct investments activity in Turkey: Patterns and prospects

International Journal of Emerging Markets

Which firms expand to the Middle East: The experience of U.S. multinationals

Strategic Management Journal

Editors’ introduction: Business history and the Middle East: Local contexts, multinational responses

Enterprise & Society

Expansion strategies of U.S. multinational firms

Impacts of foreign direct investment in economic growth in the Gulf Cooperation Council (GCC) countries

International Review of Business Research Papers