How Indian multinationals are succeeding in emerging markets without major foreign investment

“In a world of rising geopolitical risk companies are looking for ways to grow internationally without making large irreversible commitments. Rishiraj Kashyap , Andreas Schotter , Prakash Satyavageeswaran and Elizabeth L. Rose suggest that Indian MNEs operating in emerging markets, many of which have built successful operations without major foreign direct investment, provide an alternative to the model followed by Western firms. For decades, the dominant assumption in international business has been that if a foreign market is strategically important, firms should commit capital to it by setting up subsidiaries, acquiring local firms or otherwise establishing ownership and control. But our research suggests this misses an important reality in emerging markets. Some Indian multinationals have built successful and enduring foreign operations without major foreign direct investment. Instead, they have succeeded through what we call a “high involvement, low investment” (henceforth high involvement) model. The idea is simple, but the implications are significant. Rather than relying on equity ownership, these firms remain deeply involved in the market through their people: co-selling with local partners, training them, supporting service delivery, helping shape local strategy and investing managerial time in relationships. In our study of nine Indian multinational enterprises operating across industrial and software product sectors in 62 emerging markets, high involvement was not a temporary workaround. It was a stable and successful way of building business abroad, often persisting for decades. That is notable because mainstream theory predicts the opposite. If success in a foreign market depends on hard-to-trade local assets such as distributor relationships, customer trust and market knowledge, ownership is usually seen as the safer – even necessary – option. Contracts alone are assumed to be fragile. Yet our findings show that in emerging markets, Indian firms have made contractual partnerships work over the long term by becoming highly involved in partners’ operations and growth. Why high involvement works in emerging markets Emerging markets are often characterised by institutional uncertainty, uneven market information and a strong dependence on interpersonal networks. Local partners can therefore provide access to customers, regulators and other key actors. But acquiring these firms may often be difficult, risky or infeasible . This is where the high involvement model becomes effective. The Indian firms in our research combined their own capabilities – especially consultative selling, application knowledge, and service support – with the local relationship networks of independent partners. In markets where risk was high and local intermediaries mattered, a low-investment model made strategic sense. What made it work was sustained managerial involvement before and after entry. Managers did not simply appoint a partner and wait for sales. They carefully assessed local firms for network strength, growth orientation and value alignment. After entry, they travelled frequently, joined sales visits, solved customer problems directly, trained partner teams and supported long-term expansion. Across the firms we studied, these efforts built trust and made non-equity partnerships more durable than conventional theory would predict. Some companies in the study stand out. Consider “Earth” (a pseudonym), an Indian industrial firm active in several emerging markets. Earth’s managers found that handing over demand creation to local distributors did not work well. As one executive explained, “every time we farmed it off to somebody [partner], it never really worked.” Earth responded with co-selling: managers travelled with partners to meet customers, helped diagnose customer needs, and brought technical and consultative expertise into the sales process. The partner contributed local access and relationships; Earth contributed product knowledge, credibility and problem-solving. This was labour-intensive, but effective. In Indonesia, for example, one partner’s revenues rose from around 20 million Indian rupees ($210,000) to 120 million ($1.3 million) over five years under this model. Earth did not simply search for the largest available distributor. It often preferred smaller, technically oriented partners that were eager to grow and more open to close collaboration. It also paid attention to value alignment . In some cases, partner screening took up to two years, including visits to India and meetings with senior leadership. This slow and deliberate process helped create trust before significant business had even begun. What Earth demonstrates is that high involvement without heavy investment is still a serious commitment – one based on sustained managerial presence rather than equity ownership. “Mercury” (also a pseudonym), a pharmaceutical capital goods company, offers a second illustration. Mercury also entered emerging markets through partners, often choosing small but ambitious firms motivated to grow with it. Here again, the model worked because Mercury stayed heavily engaged after entry. Its managers supported local promotional events, helped market the brand, co-sold with partners, trained personnel and stayed closely involved in service delivery and business development. One Mercury manager described a case in which a Southeast Asian firm generated no business for the first 18 months after appointing a partner. Many companies would have treated that as failure. Mercury instead doubled down on involvement, continuing to support the partner through travel, seminars and relationship-building. Over time, the business grew to 10 to 15 times its earlier level. This shows that high involvement can succeed not only in short-term entry, but in patient market creation under difficult conditions. Mercury also reveals how some Indian firms are growing faster than many western rivals – by following a service-led sales strategy. Its service engineers were trained never to leave until the job was finished. In South Africa, customers reportedly experienced a level of service responsiveness they had not received from established multinationals. In emerging markets, where reliability and problem-solving can matter as much as brand prestige, this operational commitment can become a major source of competitive advantage. What Indian firms are doing differently The Indian firms in our study often lacked the internationally recognised brands of Western multinationals. In some industries, they also faced a country-of-origin disadvantage, as the Indian manufacturing industry was conventionally not perceived to meet high quality standards. That meant they could not rely on reputation alone to generate demand and instead had to build confidence directly in the market. This appears to have pushed them towards a more hands-on and partner-centric model of internationalisation. They co-created demand rather than merely supplying products, treated partner development as part of market strategy and invested managerial time in training and organisational upgrading. In several cases, they also relied on relational assets such as transparency, empathy, patience, inclusiveness and long-term orientation to preserve trust . Not every firm gets it right The study also shows that high involvement is not automatically successful. It works when firms maintain trust while deepening their involvement. Problems arise when partners begin to fear that the multinational will bypass them after learning the market. That happened in some cases when firms expanded their local presence too aggressively through multiple partners and direct staff. This weakened partners’ trust and co-operation and sometimes led to disengagement. More successful firms, such as Earth and Mercury, sustained the high involvement model because they paced market involvement and coupled it with continued senior-level engagement and long-term intent. The lesson is that the approach can be highly successful in emerging markets, but only when backed by credible relational behaviour over time. Why this matters now This matters well beyond the Indian context. In a world of rising geopolitical risk, volatile regulation and greater caution around cross-border investment , firms may increasingly look for ways to grow internationally without making large irreversible commitments. Our study suggests that this can work, especially in emerging markets, but only if firms are willing to base strategy on managerial involvement rather than financial commitment alone. This article gives the views of the author, not the position of LSE Business Review or the London School of Economics. You are agreeing with our comment policy when you leave a comment. Image credit: stockpexel provided by Shutterstock. The post How Indian multinationals are succeeding in emerging markets without major foreign investment first appeared on LSE Business Review .

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