Syntax
Literate: Jurnal Ilmiah
Indonesia p–ISSN: 2541-0849 e-ISSN: 2548-1398
Vol. 9, No.
12, Desember 2024
UNDERSTANDING
OUTWARD FDI STRATEGIES FROM INDONESIAN MULTINATIONAL ENTERPRISES: A MULTI
INDUSTRY PERSPECTIVE
Muhammad
Fadhel Maulana1, Yos
Sunitiyoso2
Intstitut Teknologi
Bandung, Indonesia1,2
Email: [email protected]1, [email protected]2
Abstract
This
study explores the Foreign Direct Investment (FDI) strategies of three leading
Indonesian multinational enterprises (MNEs)—Indofood, Adaro, and Kalbe—from the
food and beverage, mining, and pharmaceutical industries. Using a thematic
analysis, the research identifies three key themes shaping their
internationalization strategies: Strategic Global Expansion, Operational
Integration and Synergy, and Institutional and External Market Dynamics. The
findings highlight how these firms leverage global expansion to diversify
markets and enhance competitiveness, employ operational integration to achieve
synergies and control, and adapt to institutional and regulatory challenges to
mitigate risks and maintain resilience. Classical theories such as the OLI
Paradigm, Internalization Theory, and Resource-Based View (RBV) provide a foundation
for understanding these strategies, while contemporary frameworks like the
Linkage-Leverage-Learning (LLL) Framework and Springboard Theory offer nuanced
insights into the unique dynamics of emerging market multinationals (EMNEs). This
study underscores the critical role of institutional alignment, regulatory
compliance, and market adaptability in ensuring successful FDI outcomes. It
contributes to the literature by advancing theoretical frameworks to better
capture the complexities of FDI from emerging economies and offers practical
recommendations for policymakers and practitioners aiming to enhance the global
competitiveness of EMNEs.
Keywords: Foreign Direct Investment (FDI),
Emerging Market Multinational Enterprises (EMNEs), Indonesian Multinational Companies.
Introduction
Foreign direct investment (FDI) is
a crucial driver of economic growth and global integration. Traditionally
dominated by multinational enterprises (MNEs) from developed economies, FDI
patterns have shifted significantly over the past two decades with the rise of
emerging market multinational enterprises (EMNEs). These firms leverage outward
foreign direct investment (OFDI) to overcome domestic limitations, access new
markets, and acquire strategic resources (Tang & Buckley, 2022).
Figure 1. Indonesia FDI Flows (UNCTAD, 2024)
Emerging economies such as China,
India, Brazil, and Indonesia, all members of the G20, have become significant
players in the global FDI landscape. In 2023, G20 countries contributed 30% of
annual outbound FDI projects (Irwin-Hunt, 2024). Indonesia, the largest economy
in ASEAN, attracted $21.6 billion in inward FDI (IFDI) but recorded only $7.07
billion in OFDI during the same year (UNCTAD, 2024). Despite its economic potential
and ambitious vision of "Golden Indonesia 2045," which aims to escape
the middle-income trap and achieve developed country status, Indonesia’s OFDI
performance lags behind its ASEAN peers, such as Malaysia and Thailand.
Existing literature on FDI has
extensively examined the internationalization strategies of firms from
developed economies and major emerging markets like China and India (Buckley et
al., 2010; Gao, 2023). However, research on Indonesian OFDI remains sparse,
with limited studies addressing the unique challenges faced by Indonesian firms
in global markets (Carney & Dieleman, 2011; Sambodo,
2017).
Indonesian firms encounter
institutional voids, resource constraints, and perceptions of OFDI as
unpatriotic, which hinder their global expansion (Gondo et al., 2021). While
traditional frameworks like the eclectic paradigm (Dunning, 1988),
Institutional Theory (DiMaggio & Powell, 1983), Resource based views
(Barney, 1991; Wernerfelt, 1984) and contemporary
models like the LLL framework (Matthews, 2006) and Springboard (Luo & Tung,
2007) provide valuable insights into internationalization, their application to
Indonesian firms is limited (Buckley, 2023).
Figure 2. OFDI Comparison with ASEAN Countries (UNCTAD, 2024)
Additionally, existing research by
Carney and Dieleman (2011) often overlooks the role of emerging Indonesian
conglomerates such as Salim Group and Lippo Group, which account for nearly 70%
of Indonesia’s OFDI activities.
This study addresses the gap in the
literature by integrating traditional theories such as the eclectic paradigm
with contemporary frameworks like the LLL model and springboard theory to
analyse Indonesia’s OFDI dynamics (Paul & Feliciano-Cestero,
2021). It provides new insights into the factors driving OFDI decisions, the
role of economic diplomacy and institutional frameworks, and the challenges
faced by Indonesian firms in navigating global markets. By examining case
studies of prominent Indonesian firms, this study offers a nuanced
understanding of how Indonesia can leverage OFDI to achieve its "Indonesia
Emas 2045" vision.
This study focuses on three
prominent Indonesian firms—PT. Indofood CBP Sukses
Makmur Tbk (Indofood), PT. Kalbe Farma Tbk (Kalbe), and PT. Adaro Energy Indonesia Tbk (Adaro)—each representing different sectors of the
economy: food and beverage, pharmaceuticals, and mining, respectively. By
examining the internationalization strategies of these firms, this study aims
to shed light on how Indonesian firms navigate the complexities of global
expansion and what factors drive their FDI decisions.
Despite Indonesia’s growing
economic significance, its OFDI remains under-researched, raising critical
questions about the drivers and implications of its global investment
activities. Overall, this study will look to identify the FDI activities
conducted by Indonesian firms which explained in the following research
objectives: (1) To identify and analyse the key themes that emerge from the FDI
activities of Indonesian firms across different industries. (2) To examine how
these identified themes manifest within the specific contexts of the mining,
food and beverage, and pharmaceutical industries. (3) To assess the
implications of these FDI strategies for the long-term growth and global
competitiveness of Indonesian companies.
Research
Methods
This
study adopts a qualitative methodology grounded in an interpretivist paradigm
and an inductive approach (Heale and Twycross, 2018).
This approach is well-suited for exploring the complexities and contextual
factors influencing outward foreign direct investment (OFDI) activities of
Indonesian multinational enterprises (Cui et. al., 2022). By focusing on
subjective experiences and motivations, the qualitative method allows for a
deep understanding of the internationalization strategies of selected firms.
Research Strategy: Case Studies
To
ensure a comprehensive analysis, multiple case studies will be examined,
allowing for cross-case comparison, enhancing the robustness of findings, and
identifying patterns or consistencies across different cases (Saunders et al.,
2019; Yin, 2018). The findings will be compared with existing theoretical
frameworks of FDI, offering new perspectives on OFDI conducted by firms from
emerging markets.
Data Collection
To
achieve a comprehensive analysis of the outward foreign direct investment
(OFDI) activities of Indonesian firms, this research will gather data from
various secondary sources. Data were collected from various sources to ensure accuracy
and relevance as shown in table 1 below.
Table 1. Data Sources
|
Source
of Data |
Brief
Description |
|
Firms Annual Reports |
Presenting detailed
financial information, strategic insights, and operational highlights of the
selected firms. |
|
Refinitiv Eikon – Deal Tear Sheet |
Supplying detailed
information on financial transactions, including mergers and acquisitions
(M&A) |
|
Scientific Journals and
News Articles |
Providing theoretical
perspectives and empirical findings related to OFDI. |
The data
collection process will be detailed and methodical to ensure the accuracy and
relevance of the information obtained. Moreover, the sample in this research is
chosen by purposive sampling. It involves selecting entities based on specific
criteria relevant to the research objectives (Easterby-Smith et. al., 2021). There
are three prominent Indonesia MNEs that selected for this study. The samples are
shown in table 2 below.
Table 2. Sample Cases
|
Type of FDI |
Brief Description |
|
Indofood CBP |
Acquisition
of Pinehill Corpora in 2020 |
|
Adaro Energy |
Acquisition
of 80% Rio Tinto’s ownership of Kestrel Mine, Australia |
|
Kalbe Farma |
Joint Venture
in ASEAN |
These
firms have been selected due to their significant contributions to Indonesia's
economic growth and their notable FDI activities.
Data Analysis
Secondary
data analysis presents challenges such as maintaining research rigor. Thematic
analysis (TA) will be used to address challenges in secondary data analysis. TA
is a qualitative method used to develop, analyse, and interpret patterns that
emerge from a dataset (Braun & Clarke, 2022). This analysis highlights the
flexibility and depth of TA, making it suitable for exploring diverse topics in
FDI of Indonesian multinational enterprises. The reflexive analysis aligns with
an inductive approach driven by the collected data.
Table 3. Six Stage Framework of Thematic Analysis (Braun and Clarke, 2022)
|
Phases |
Description |
|
Data Familiarisation |
Reading and re-reading data, making notes to
understand the dataset. |
|
Coding |
Generating concise labels (codes) that identify
important features of the data relevant to the research question. |
|
Generating Initial Themes |
Collating codes into potential themes, gathering
all data relevant to each potential theme. |
|
Developing and Reviewing Themes |
Assess the initial fit of provisional themes.
Considering relationship between themes and existing knowledge. |
|
Defining, and Naming Themes |
Ensuring the boundaries for each established
theme. Writing a brief synopsis of each theme. |
|
Producing the Report |
The analysis is being presented to provide deeper
insight to identified themes and compared with existing literature. |
This
structured approach ensures thorough, systematic analysis, generating
meaningful insights from secondary data and understanding the complexities and
contextual factors influencing FDI activities of Indonesian multinational
enterprises.
Results and Discussion
Thematic Analysis Overview
The
thematic analysis identifies three primary themes that capture the strategic
decisions and challenges faced by Indonesian firms in their OFDI efforts. Each
theme connects to theoretical frameworks, as can bee
seen in the table below. Classic theory provides a broad foundation while
specific frameworks like LLL and Springboard offer nuanced insights into the
strategies employed by Indonesian firms.
Table 4. Thematic Analysis Overview
|
Theme |
Sub-Theme |
Description |
Theoretical Framework |
|
Strategic Global Expansion |
Strategic Market Expansion |
Focus on diversifying
markets, expanding consumer bases, and enhancing global competitiveness for
sustainable growth. |
OLI Paradigm |
|
Local Production and
Strategic Partnerships |
Institutional Theory |
||
|
Strategic Investments in
Innovation and R&D Collaboration |
Springboard Theory |
||
|
Synergy and Operational
Integration |
Global Manufacturing and
Distribution Synergies |
Explores how companies
integrate international acquisitions and achieve synergies within their operations. |
Internalisation Theory |
|
Operational Efficiency and
Knowledge Transfer |
Springboard Theory |
||
|
Collaborative and Strategic
Synergies |
|||
|
Institutional and External
Market Dynamics |
Institutional and Policy
Dynamics |
Examines how firms address external
factors and navigate institutional distance, overcoming regulatory challenges
and adapting to market conditions. |
Institutional Theory |
|
Institutional and Market
Risks |
Springboard Theory |
||
|
Regulatory Changes and
Compliance |
These
themes illustrate the motivations and strategies driving Indonesian firms’ OFDI
activities. For example, while all firms aim to strengthen their global market
positions, Kalbe Farma places a unique emphasis on acquiring resources and
capabilities through partnerships.
The
subsequent sections provide explanation of each case studies of Indofood,
Adaro, and Kalbe, illustrating how each firm embodies these themes in its
internationalization strategies.
Case
Study and Thematic. Analysis
1) Case 1: Indofood
FDI Activities
Indofood CBP Sukses
Makmur, a subsidiary of Indofood Sukses Makmur
(INDF), has actively engaged in foreign direct investment (FDI) to expand its
global presence, particularly through affiliated partnerships and establishing
manufacturing facilities in key regions such as the Middle East, Africa, and
Southeastern Europe. The company leverages its flagship brand “Indomie” to facilitate these expansions, offering
comprehensive support packages including ingredients and technical support to
local manufacturers.
Figure 3. Pinehill Company Limited Operational Area (Indofood CBP, 2020)
Since the first international
venture in 1990, Indofood has strategically used joint ventures, notably with
Pinehill Company Limited, to strengthen its market position in these regions.
Figures 1 and 2 illustrate the operational areas and the ownership structure
pre- and post-acquisition, underscoring the control exerted by Anthoni Salim and his family over these strategic
decisions.
Figure 4. Ownership Structure of Pinehill Before and After Acquisition (First Pacific, 2020)
The acquisition of Pinehill notably
enhanced Indofood CBP's global footprint, allowing it to tap into significantly
larger markets compared to its domestic base. This strategic move resulted in a
considerable increase in its international sales, which rose from 11% of total
sales in 2019 to 30% in 2023, with notable growth in the Middle East and Africa
as detailed in Table 4. This expansion not only fortified Indofood's position
as a global noodle player but also demonstrated effective internalization of its
operations in these new markets.
Table 5. Indofood Net S ales 2019-2023 (Indofood CBP, 2023)
|
Net Sales |
2019 |
2020 |
2021 |
2022 |
2023 |
|
Indonesia |
37,714,609 |
38,275,273 |
47,622,817 |
46,268,198 |
47,622,817 |
|
Middle
East and Africa |
2,777,796 |
6,142,783 |
16,156,888 |
14,944,306 |
16,156,888 |
|
Other
Asia |
821,583 |
951,739 |
1,585,734 |
1,263,851 |
1,585,734 |
|
Others |
982,715 |
1,271,253 |
2,544,462 |
2,321,161 |
2,544,462 |
|
*In
millions of Rupiah |
|||||
2) Case 2: Adaro
Acquisition on Kestrel Coal Mine in Australia
PT. Adaro Energy Indonesia Tbk. (Adaro), a leading Indonesian mining firm,
significantly advanced its global strategy through the strategic acquisition of
an 80% stake in the Kestrel Coal Mine in Australia. This critical move,
facilitated through joint venture of Adaro Capital Limited (ACL) and EMR
Capital, marks a strategic pivot to diversify into the metallurgical coal
sector, essential for steel production and less impacted by energy market
volatility.
The acquisition serves Adaro’s
long-term strategy to reduce its reliance on thermal coal by entering new,
stable markets. The choice of EMR Capital as a partner leverages their mining
expertise and financial strength, enhancing Adaro's operational capabilities
and financial robustness, positioning it more competitively in the global coal
market.
Table 10 illustrates how
Adaro has leveraged this acquisition to enhance its presence in international
markets, with notable increases in revenue streams from key regions
post-acquisition.
Table 6. Adaro Geographical Revenue Segmentation 2019-2023 (Adaro, 2024)
|
Region |
2019 |
2020 |
2021 |
2022 |
2023 |
|
|
Domestic |
908,446 |
734,108 |
863,796 |
1,157,249 |
1,235,334 |
|
|
China |
345,795 |
270,028 |
972,921 |
900,917 |
1,273,430 |
|
|
Malaysia |
446,924 |
349,432 |
566,231 |
1,185,034 |
997,234 |
|
|
India |
408,230 |
255,985 |
391,157 |
1,121,041 |
700,486 |
|
|
Japan |
328,374 |
263,197 |
348,100 |
933,120 |
660,601 |
|
|
South Korea |
340,616 |
191,490 |
217,442 |
609,506 |
545,127 |
|
|
Philippines |
0 |
0 |
217,501 |
591,781 |
468,655 |
|
|
Hong Kong |
0 |
0 |
154,148 |
574,513 |
241,181 |
|
|
Taiwan |
0 |
0 |
96,653 |
694,834 |
212,882 |
|
|
Thailand |
0 |
0 |
0 |
114,866 |
122,313 |
|
|
Others |
678,769 |
470,602 |
470,602 |
219,538 |
60,314 |
|
|
*in thousands of US Dollars |
|
|
|
|
|
|
3)
Case 3: Kalbe International Expansion
PT
Kalbe Farma Tbk (Kalbe), recognized as Indonesia's
and ASEAN's largest pharmaceutical company, exemplifies a sophisticated
approach to internationalization among emerging market multinationals. Kalbe
has implemented a combination of organic growth, strategic partnerships, and
targeted acquisitions to enhance its global presence and capitalize on its
strengths in research and development (R&D) and brand management.
Kalbe's
strategy focuses on extending its market reach beyond Indonesian borders to
diversify revenue streams and reinforce its R&D capabilities. The firm's
initial international ventures involved exporting and licensing within ASEAN,
with expansions into the Middle East and Africa. The significant leap in
Kalbe’s international strategy occurred in 2004 with the establishment of Innogene Kalbiotech Pte. Ltd. in Singapore, marking its first direct foreign
investment aimed at developing biotechnology products.
Following
the action, Kalbe set up Kalbe International Pte.
Ltd. in 2007 to oversee its expanding international operations. Despite these
efforts, international sales have remained stagnant at approximately 5% of
total sales over the past five years, as illustrated in Table 12, emphasizing
the challenges faced in scaling these operations globally.
|
Kalbe |
2019 |
2020 |
2021 |
2022 |
2023 |
|
Domestic |
21,445,808 |
22,000,272 |
27,242,789 |
25,013,466 |
28,559,990 |
|
International |
1,187,667 |
1,112,382 |
1,690,713 |
1,247,728 |
1,889,143 |
Table 7. Kalbe Sales 2019-2023 (Kalbe, 2024)
Theme
1: Strategic Global Expansion
Strategic global expansion
represents a critical pathway for emerging market multinationals (EMNEs) to
mitigate domestic market constraints, stabilize revenues, and compete on a
global scale. For firms like Indofood, Adaro, and Kalbe, such strategies not
only enhance competitiveness but also reflect broader trends in EMNEs
leveraging FDI to address home market saturation, diversify revenue streams,
and exploit global opportunities (Völgyi & Peragovics,
2020). The examples of result from theme 1 is presented in table below.
Table 8. Strategic Global Expansion
|
Company |
Sub-Theme |
Evidence |
|
Indofood |
Local
production and strategic partnerships |
“The acquisition of PCL increases ICBP’s
consumer base by approximately 885 million people across PCL Group’s markets
— a base that is significantly larger than Indonesia’s population of 270
million. It would allow us to develop and expand our core business as a
global instant noodles player, and to create stronger value for our
shareholders.” |
|
Adaro |
Strategic
Market Expansion |
“The
acquisition of Kestrel is a significant milestone in the Adaro Group’s
strategic expansion of metallurgical coal portfolio. Kestrel produces high
volatile, high fluidity coking coal sought after by customers in the seaborne
market” |
|
Kalbe |
Strategic
investment in innovation and R&D |
“PT
Kalbe Farma Tbk (KLBF), a pharmaceutical company,
has made an investment worth USD 10 million in Progen
Co. Ltd. to enhance the collaboration of research and development (R&D)
in biological drugs.” |
|
Sources: Adaro (2018);
Indofood (2021); Kalbe (2023); IDN Financialas (2023) |
||
Indofood’s strategy highlights the
importance of localized production and strategic partnerships in the food
industry, where responsiveness to consumer preferences and supply chain
efficiency are essential. This aligns with the OLI Paradigm, emphasizing location-specific
advantages such as proximity to consumers and lower production costs (Dunning,
2000).
The Pinehill acquisition
illustrates a shift from partnerships to wholly owned subsidiaries, enabling
Indofood to scale operations and expand its consumer base by 885 million people
(Indofood, 2023). This transition supports findings by Li et al. (2018), who
argue that EMNEs often use joint ventures as transitional mechanisms to
ownership. The LLL Framework further underscores Indofood’s ability to learn
from partnerships, reflecting a strategy commonly observed in Brazilian
multinationals entering culturally proximate markets (Gammeltoft
& Cuervo-Cazurra, 2021; Forte, 2023).
Adaro’s acquisition of the Kestrel
Coal Mine reflects its resource-seeking strategy to diversify into
metallurgical coal and reduce reliance on thermal coal. This aligns with the
RBV, which emphasizes acquiring unique resources to enhance competitive advantage
The Springboard Theory explains how
Adaro uses FDI to "spring" into high-value sectors, compensating for
domestic constraints and mitigating risk (Luo & Tung, 2007). Adaro’s
developed-market focus contrasts with Indofood and Kalbe, demonstrating the
flexibility of EMNE strategies to adapt to industry-specific needs.
Kalbe’s investment in R&D
collaborations, such as its partnership with Progen
Co., highlights its use of linkages to access local knowledge and enhance
technological capabilities. This aligns with the LLL Framework, where EMNEs
adapt and learn from partnerships to refine their strategies (Handoyo, 2020).
The Springboard Theory (Luo &
Tung, 2007) further supports Kalbe’s FDI approach of overcoming domestic
resource constraints by leveraging foreign collaborations. Tang and Buckley
(2022) note that EMNEs often invest in countries with institutional
similarities, which explains Kalbe’s focus on emerging markets in ASEAN and
Africa.
The strategic expansions of
Indofood, Adaro, and Kalbe demonstrate the adaptability and diversity of EMNE
strategies. While Indofood and Kalbe focus on leveraging institutional
familiarity in emerging markets, Adaro’s resource-seeking approach in developed
markets highlights the flexibility of EMNEs to navigate global opportunities.
Together, these firms exemplify how emerging markets contribute to reshaping
global value chains and competing with developed-market multinationals (Buckley
et al., 2018).
Theme
2: Operational Integration and Synergy
Operational integration and synergy
are critical strategies for emerging market multinationals (EMNEs) to optimize
performance, minimize risks, and enhance competitive advantage in international
markets (da Silva-Oliveira, 2021). For firms like Indofood, Adaro, and Kalbe,
these strategies involve internalizing operations, leveraging partnerships, and
integrating supply chains to maximize value creation post-FDI (Nazzal et. al., 2023). This approach reflects broader
trends in EMNEs using operational integration to streamline processes,
safeguard proprietary knowledge, and build resilience (Buckley & Casson,
1976; Barney, 1991). The examples of results from Theme 2 are summarized in the
table below:
Table 9. Operational Integration and Synergy
|
Company |
Sub-Theme |
Evidence |
|
Indofood |
Global
manufacturing and distribution synergies |
"One
of the keys to Indomie's success in Nigeria has
been its business model. The company started building all the infrastructure
needed in the country to keep the costs low while introducing Indomie noodles in 1988 through export. This enabled them
to develop a strong distribution network that reaches even the most remote
areas of the country." |
|
Adaro |
Operational
efficiency and knowledge transfer |
“…
the Kestrel acquisition would also provide Adaro with expertise in
underground mining that it could potentially apply in Indonesia, where
underground mining is still uncommon." |
|
Kalbe |
Collaborative
and strategic synergies |
“To
further secure supplies of raw material from China, a new joint venture
company, Global Stairway Synergy Co (GSS) was established in 2022. Amidst
disruptions in global supply chain, this joint venture is expected to
strategically strengthen Kalbe’s capabilities, given the country’s high
dependence on imports of raw materials.” |
|
Sources: Suzuki
and Tavsan (2016); Adaro (2018); Kalbe (2023) |
||
As detailed in the table above,
Indofood’s strategy to build infrastructure in Nigeria underscores the
significance of global manufacturing and distribution synergies for achieving
both cost-efficiency and expansive market reach. A prime illustration is the
Pinehill acquisition, through which Indofood internalized its production
processes and expanded its capacity to 36 billion packs annually solidifying
its status as the world’s largest instant noodle producer (Indofood, 2021). By
consolidating supply chains and capitalizing on economies of scale, Indofood
effectively dominates price-sensitive segments while maintaining robust quality
control.
Adaro’s acquisition of the Kestrel
Coal Mine illustrates a similarly integrative approach, albeit focused on
operational efficiency and knowledge transfer in mining. Through internalizing
Kestrel’s operations, Adaro bolstered its expertise in underground mining—an
underdeveloped capability in Indonesia—while diversifying its portfolio to
include metallurgical coal, a critical input for steelmaking (Munthe, 2018; Tani, 2018). This integration not only
enabled Adaro to tap premium markets such as Japan but also enhanced its
competitive positioning in the global coal industry.
By contrast, Kalbe’s operational
integration strategy centers on collaborative
partnerships and supply chain integration. Its joint venture with Global
Stairway Synergy (GSS) in China, for example, ensures a steady supply of raw
materials and mitigates exposure to global supply chain disruptions (Völgyi
& Peragovics, 2020). The firm’s establishment of
R&D hubs like Innogene Kalbiotech
in Singapore underscores a commitment to continual innovation and market
adaptation. Additionally, Kalbe’s integration of CRM systems across its ASEAN
operations ensures uniform customer service and operational consistency,
thereby strengthening its competitive advantage in international markets.
Collectively, these approaches
align with Internalization Theory (Buckley & Casson, 1976) and the
Resource-Based View (RBV) (Barney, 1991), both of which underscore the
strategic imperative to reduce transaction costs and maintain control over key
operations. Indofood exemplifies these principles by leveraging an extensive
Nigerian network to dominate cost-sensitive markets while safeguarding quality,
particularly after the 2022 product safety incident in Egypt (Suzuki & Tavsan, 2016; Food Safety Africa, 2022; Kuah,
2023; Bailey & Adebayo, 2024). Adaro similarly employed internalization
through its Kestrel acquisition, gaining direct operational control to protect
proprietary knowledge and streamline mining processes. Kalbe focused on
improving supply chain resilience via partnerships with local entities,
ensuring steady access to raw materials amidst global uncertainties. Beamish
and Chakravarty (2021) further advocate applying RBV to develop subsidiary
autonomy, which could optimize the operational processes of foreign
subsidiaries.
The Linkage-Leverage-Learning (LLL)
framework (Thite, 2016) offers additional insight
into how emerging-market multinationals adapt to regional needs and glean
learning advantages from partnerships. Indofood, for instance, refined its
global integration strategy by transitioning from joint ventures to wholly owned
subsidiaries. Kalbe leveraged its collaboration with Ecossential
in the Philippines to acquire deeper market knowledge and tailor its operations
to local consumer preferences—while retaining efficiency across ASEAN markets.
Despite adopting different tactics,
these firms share theoretical convergences in their emphasis on operational
integration. The strategy allowing the firms to access newer technologies,
improving operational capabilities, and leveraging network opportunities
globally (Benoy & Morley, 2020). Indofood and Adaro favour greater
internalization to secure direct control and proprietary know-how, whereas
Kalbe relies on cooperative alliances to harness external expertise and
mitigate supply chain disruptions.
These variations mirror the
particular dynamics of their respective industries: Indofood emphasizes
price-sensitive consumer goods, Adaro prioritizes specialized resource
extraction, and Kalbe navigates regulatory intricacies and supply chain
vulnerabilities in pharmaceuticals.
Contemporary theoretical
extensions, such as Intermediation Theory (Casson, 2022), shed light on how
multinational enterprises balance market entry strategies alongside internal
organizational structures. Indofood’s region-focused integration stands in contrast
to Kalbe’s market-specific adjustments, exemplifying the role of intermediation
in shaping both geographic segmentation and overall operational performance.
Theme
3: External Market Dynamics
Institutional and external market
dynamics exert significant influence on how emerging market multinationals
(EMNEs) formulate and execute their internationalization strategies. In
particular, companies like Indofood, Kalbe, and Adaro exhibit strategic agility
in navigating regulatory frameworks, mitigating institutional challenges, and
managing market volatility. Drawing on Institutional Theory (DiMaggio and
Powell, 1983; Scott, 1995) and the eclectic OLI Paradigm, this section examines
how these firms leverage government support, adapt to regulatory regimes, and
diversify operations to minimize risk in global markets. The examples of
results for Theme 3 are summarized in the table below:
Table 10. External Market Dynamics
|
Company |
Sub-Theme |
Evidence |
|
Indofood |
Institutional
and policy dynamics |
"Penetrate
the non-traditional European market with Halal products, supported by the
Indonesian embassy in Belgrade. The factory was established in Inđija, covering 5 hectares with an investment of 11
million Euro." |
|
Adaro |
Institutional
and market risks |
“By
increasing its coking coal operations, Adaro hopes to offset the consequences
of the government cap.” |
|
Kalbe |
Regulatory
changes and compliance |
“In
2019, Kalbe International has built its first manufacturing plant in Myanmar
…. to minimize constraints from the local government’s protectionism policies
against imported goods.” |
|
Sources:
Watanabe (2014); Just Food (2016); Adaro (2019); Asmarini
and Jensen (2018); Kalbe (2023) |
||
Several examples underscore the
importance of formal institutional backing and bilateral agreements for EMNEs.
Indofood’s factory in Inđija, Serbia, a project
spanning five hectares and costing €11, benefited from the Indonesian
government’s support in penetrating European halal markets (Watanabe, 2014; The Embassy
of the Republic of Indonesia in Belgrade,
2024).
Through this institutional
alliance, Indofood not only minimized market-entry barriers but also gained a
competitive edge by catering to growing halal-food demand in Europe. Likewise,
Kalbe navigated stringent local regulations in Myanmar by building a manufacturing
facility, thereby alleviating the impact of protectionist policies. Taken
together, these cases align with Gammeltoft (2021),
who argues that government relations can mitigate risk and expedite the foreign
direct investment (FDI) process.
EMNEs from emerging economies must
also respond proactively to shifting regulatory environments to maintain
competitiveness (Tang & Buckley, 2022). Kalbe’s new plant in Nigeria
exemplifies this approach: local production requirements for pharmaceutical
products prompted the firm to form a collaboration with Orange Drugs Ltd.,
ensuring compliance with local regulations. Similarly, Kalbe prepared for ASEAN
Free Trade Area (AFTA) and Pharmaceutical Inspection Cooperation Scheme (PICS)
standards, enabling seamless distribution within Southeast Asia. This
underscores how institutional compliance not only mitigates legal and
regulatory risks but can also unlock new market opportunities.
Adaro’s coal-price-cap scenario in
Indonesia further illustrates how EMNEs adapt to institutional pressures. By
expanding coking coal operations abroad—particularly through ownership of the
Kestrel Coal Mine in Australia—Adaro offsets domestic regulatory constraints
(e.g., the government-imposed coal price cap) and secures premium markets such
as Japan. This diversification lessens dependence on the Indonesian market and
strengthens Adaro’s overall resilience against regulatory risks (Adaro, 2019; Munthe, 2018; Tani, 2018).
Market volatility is another
external factor that EMNEs navigate through diversification strategies (Tang
& Buckley, 2022). Adaro’s diversified operations—spanning Indonesia,
Australia, and markets in Europe and Japan—allow the company to mitigate regional
risks and revenue fluctuations. For instance, declines in Chinese coal imports
or geopolitical tensions in one region can be offset by stronger demand in
another. Springboard Theory (Luo & Tung, 2007) applies here, with Adaro
using its Australian assets to “spring” into higher-value global segments,
buffering against domestic and regional instabilities.
Kalbe likewise mitigates
institutional voids and political risks by localizing production. This approach
proved effective in Myanmar, where establishing an on-the-ground manufacturing
facility neutralized the impact of protectionist barriers. Brink (2015)
emphasizes that such proactive strategies can be particularly vital for EMNEs,
as they often face a patchwork of regulatory regimes and market uncertainties
worldwide.
Research further highlights how
external institutional environments shape FDI from different emerging markets.
For instance, Buckley (2018) and Brink (2015) note that Chinese firms benefit
from extensive policy support under the Belt and Road Initiative, leveraging
government-backed strategies like the “Go Out” policy. Indian multinationals
similarly leverage state-backed technology acquisition strategies (Buckley,
2018). By contrast, Indonesian EMNEs such as Indofood, Kalbe, and Adaro may
face more pronounced institutional voids and resource constraints (Volgyi & Peragovics, 2021).
However, bilateral agreements—such as those between Indonesia and
Serbia—highlight that Indonesian firms can still capture institutional
advantages under the right conditions.
Nayyar et al. (2022) observe that
normative institutional distance profoundly affects Indian EMNEs, an insight
that resonates with how Kalbe and Indofood navigate cultural alignment and
partner with local entities to ease institutional frictions abroad. As Liu et
al. (2023) point out, both Chinese and Indonesian OFDI share drivers related to
energy, logistics, and infrastructure. Adaro’s search for energy assets abroad
and Indofood’s or Kalbe’s focus on production and logistics expansions
exemplify these parallels.
Conclusion
This study highlights the strategic
approaches of Indonesian multinationals Indofood, Adaro, and Kalbe in
navigating international markets through Foreign Direct Investment (FDI). The
research underscores three key themes: Strategic Global Expansion, Operational
Integration and Synergy, and Institutional and External Market Dynamics. The
findings reveal that these firms employ diverse strategies, such as joint
ventures, acquisitions, and international diversification, to stabilize
revenues, enhance global presence, and mitigate regulatory risks. Additionally,
operational integration through strengthened supply chains, local expertise,
and knowledge transfer plays a vital role in maximizing the benefits of FDI.
These strategies illustrate how emerging market multinationals (EMNEs) adapt to
the complexities of international markets to achieve global competitiveness.
The study further integrates
classical and contemporary FDI theories to provide a nuanced understanding of
EMNE strategies. While traditional frameworks like the OLI Paradigm and
Resource-Based View explain ownership advantages and operational efficiencies,
newer theories such as the Linkage-Leverage-Learning Framework and Springboard
Theory address challenges unique to EMNEs, such as leveraging partnerships and
learning from foreign markets. The findings emphasize the importance of
aligning FDI strategies with cultural and institutional contexts while
highlighting the need for supportive policies to foster international
collaborations. By offering actionable insights for practitioners and
policymakers, this research contributes to the growing body of literature on
EMNEs and sets a foundation for future studies on their evolving strategies in
global markets.
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