The research on the internationalisation process of Southeast Asian multinationals is limited. Especially the unique role of the government on Government-linked companies’ (GLC) corporate governance and their international development has been rarely considered. The agency theory explains an inherent governance problem but needs to be examined from a different angle for GLCs. Theories on internationalisation are based on the Western world, but the patterns are different for developing countries such as Malaysia. The analysis of a firm’s strategy requires to be viewed holistically, embedding it in its economic, cultural and politic context. Utilising a contextual approach and an in-depth case study methodology, this study describes the internationalisation process of Malaysia’s conglomerate Sime Darby and reviews it based on theoretical concepts. Considered individually, accepted theories, as, for instance, the Eclectic Paradigm, were found to be incomplete in explaining the evolving internationalisation of Sime Darby. Combined with thoughts of the Uppsala approach and the phenomenon of psychic distances the theories are complementary. The author detected that together, they can be used to explain the internationalisation process of Malaysia’s GLC. The findings, limitations of research and opportunities for further research are discussed.
Keywords: Internationalisation, Government-linked Companies, Corporate Governance
Table of Contents
1 Introduction
2 State-Owned Enterprises
2.1 An Introduction to State-Owned Enterprises
2.2 Types of SOEs and Motives for Nationalisation
2.3 The Government’s Regulatory Impact on GLCs
2.4 Government-linked Companies’ Performance
3 Corporate Governance
3.1 Introduction to Corporate Governance
3.2 The Agency Theory and a Countervailing Approach
3.3 Corporate Governance and Agency Theory in GLCs
3.4 Khazanah Nasional – A State-Owned Holding
3.5 The Agency Problem of Khazanah
3.6 New Government Regulations in Malaysia
4 The Internationalisation Process of Malaysian GLCs
4.1 Internationalisation Theories
4.1.1 The Eclectic Paradigm
4.1.2 Investment Development Path
4.1.3 International Product Life-Cycle Theory
4.1.4 Uppsala Theory
4.2 The Motives behind the Internationalisation of Malaysian Firms
4.3 The Malaysian Internationalisation Process – Do Government Ties constitute a Competitive Advantage?
4.4 Critical Discussion of the Applicability of Theories and the Influence of the Government in Malaysian GLCs
4.5 Combining Internationalisation and the Agency Theory for Malaysian GLCs
5 Methodology
6 Sime Darby – A Case Study
6.1 Company Profile
6.2 Ownership Structure
6.3 Governance and Government Influence
6.4 Sime Darby’s Internationalisation Process
6.5 Discussion of Sime Darby’s Internationalisation Process in view of the Theoretical Foundations
6.5.1 Ownership Advantages
6.5.2 Location Advantages
6.5.3 Internationalisation Advantages
6.5.4 Sime Darby’s Motives for Internationalisation
6.6 Summarising Thoughts in view of Internationalisation Theories
7 Conclusion and Contribution to Literature
Research Objectives and Core Themes
This master thesis investigates the internationalisation process of Malaysian Government-linked Companies (GLCs) through a holistic, contextual approach, specifically examining the interplay between state ownership, corporate governance, and international business strategy. The central research objective is to assess the applicability of Western-centric internationalisation theories to the unique economic and political environment of Malaysia, using Sime Darby as an in-depth case study to understand how government influence affects strategic decision-making.
- The specific role of government in shaping corporate governance and international development of GLCs.
- The evaluation of traditional internationalisation theories (e.g., Eclectic Paradigm, Uppsala Model) in the context of emerging market economies.
- The influence of political connections and government-linked investment companies on firm strategy and market entry.
- The role of "psychic distance" and cultural factors in the regional internationalisation patterns of Southeast Asian conglomerates.
- The application of Agency Theory to understand conflicts between state objectives and shareholder value maximization.
Excerpt from the Book
6.5.1 Ownership Advantages
Sime Darby enjoyed a variety of ownership advantages, many of them directly or indirectly influenced by the government.
The conglomerate has achieved a certain size according to the range of products, the geographical range, the financial possibilities and its capabilities to absorb risk. Together with a well developed logistics network and in some markets, even exclusive distribution rights (e.g. for Caterpillar in Malaysia) this leads to huge entry barriers for new competitors and forms a very respectable bargaining power.
This power is further enhanced by the company’s outstanding brand reputation domestically and internationally. This could be achieved through a typical strategic move of increasing the brand’s image by partnering with a more recognised brand. SD joined forces with high-value brands such as BMW, Ford or Caterpillar. Additionally, the connection with the government seems to be beneficial for Sime Darby. It facilitates the access to foreign market places via the help of the ministry and its agencies. The strong bonds with the government and explicitly its agencies have been a strong competitive advantage for the firm. ‘PNB gave Sime Darby a remarkable advantage, in accessing investment opportunities to which other industrialists did not have access’ (S. Z. Ahmad & Kitchen, 2008).
Further, the government invested funds are among the strongest Malayan capital providers, hence, have been a beneficial link in receiving funds necessary for international expansion. It is advantageous, of course, regarding the connections GLICs offer, but also do Credit Rating Agencies lift the rating due to a government-link often with 1-2 notches. In the evaluation of the credit rating of SD, Reuters does not assume the GLICs to have an effect on the credit worthiness (Satish, 2013). This is contradictory to literature, which assumes that the government-link leads to easier access to funding. The partnership with those strong investment companies gives SD an outstanding reputation and does not only help to improve the image towards financial institutions but also its attractiveness for Joint Ventures.
Dunning’s ownership advantages definitely exist in the case of Sime Darby. But it is clearly outstanding the fact, that most of them were only realised through the strong link with the government.
Summary of Chapters
1 Introduction: Provides an overview of the role of GLCs in global and Malaysian contexts, establishing the significance of the government-business link in economic development.
2 State-Owned Enterprises: Explores the history, types, and motives behind nationalisation, focusing on how government regulations and performance requirements shape these entities.
3 Corporate Governance: Analyzes the agency problems inherent in GLCs, the role of State-Owned Holdings like Khazanah, and the specific impact of Malaysia's multi-ethnic environment on governance standards.
4 The Internationalisation Process of Malaysian GLCs: Discusses standard internationalisation theories and examines whether government ties create a competitive advantage, including the use of various fiscal and non-financial incentives.
5 Methodology: Outlines the qualitative, case-study based research approach used to interpret the complex contextual factors influencing Sime Darby’s international expansion.
6 Sime Darby – A Case Study: Applies the theoretical framework to the specific history, ownership structure, and internationalisation strategy of Sime Darby, highlighting the critical role of government support in its success.
7 Conclusion and Contribution to Literature: Synthesizes the findings, confirming that while traditional theories offer a starting point, they must be augmented with contextual variables to explain the unique success and challenges of Malaysian GLCs.
Keywords
Internationalisation, Government-linked Companies, Corporate Governance, Sime Darby, Malaysia, Agency Theory, State-Owned Enterprises, Foreign Direct Investment, Khazanah Nasional, Ownership Advantages, Economic Development, Joint Ventures, Strategy, Southeast Asia, Public Policy
Frequently Asked Questions
What is the primary focus of this thesis?
The thesis focuses on the internationalisation process of Malaysian Government-linked Companies (GLCs), analyzing how state ownership and corporate governance affect their global expansion strategies, with a particular focus on the conglomerate Sime Darby.
Which central theme does the research address?
The research explores the intersection of political influence, corporate strategy, and economic development in Southeast Asian emerging markets, challenging Western-centric business theories in the process.
What is the core research objective?
The objective is to understand how the unique relationship between the Malaysian government and its GLCs influences their internationalisation decisions and to evaluate whether existing academic theories can sufficiently explain this behavior.
What methodology is employed in this study?
The author uses an in-depth, exploratory case study methodology. This involves a qualitative analysis of annual reports, government publications, and business literature to achieve a holistic understanding of the contextual factors surrounding Sime Darby.
What does the main body of the work cover?
The main body examines the history of State-Owned Enterprises (SOEs), the theoretical frameworks of corporate governance and the agency problem, established internationalisation theories (such as the Eclectic Paradigm and Uppsala Model), and a detailed case study of Sime Darby.
Which keywords characterize this work?
Key terms include Internationalisation, Government-linked Companies (GLCs), Corporate Governance, Sime Darby, Agency Theory, and State-Owned Enterprises (SOEs).
How does the government influence Sime Darby's international success?
The government influences success by providing privileged access to capital through government-linked investment companies, facilitating connections with foreign entities, and supporting strategic goals that align with national development, such as the Vision 2020 agenda.
What are the limitations of applying Western theories to Malaysian GLCs?
Western theories often assume a separation of business and state and prioritize profit-maximization models. In the Malaysian context, GLCs must balance economic goals with social and political mandates, meaning these theories often fail to account for cultural networks and state-driven strategic objectives.
- Quote paper
- Lars Marquardt (Author), 2013, The Internationalisation Process and Corporate Governance of Malaysia’s Government-linked Companies, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/262772
