Internationalization of Indian Engineering, Procurement & Construction Firms.
| Author | Bhattacharyya, Som Sekhar |
Introduction
Internationalization has been increasingly practiced these days by Indian business (Niosi &Tschang, 2009). This phenomenon got steam in 1991 when the Indian economy transitioned from being an isolated domestic market towards becoming integrated with the world market (Ghemawat & Khanna, 1998; Sasidharan & Kathuria, 2011). With successive reforms in Indian economic policies, Indian firms perceived market opportunities and were motived to venture into international markets (Kanungo, 2011). Often Indian firms have been dependent on strategic alliances (Bhattacharyya & Shaik, 2009). International markets offered a way out for Indian firms for being away from the intense competition often prevalent in the domestic market as it had relatively lower profit margin (Bhattacharyya, 2011). Indian engineering, procurement and construction (EPC) business firms with low margin and demand in the domestic Indian market viewed internationalization as an opportunity to improve their prospects of profit growth by entering into foreign markets (Bhattacharyya & Jha, 2017). Over a period of time this not only offered market expansion, but also access to new technologies, enhanced horizontal or vertical integration possibilities and international vision (Kanungo, 2011). One could argue that these were also the prime reasons that prompted many Indian EPC firms to internationalize.
Over the years, EPC firms had played a pivotal role in the development of the infrastructure of both the developed and emerging economies and in India, the construction sector has become one of the large industries and market segments (Shyamal, 2014). EPC market in India has been expected to grow at a healthy rate around a CAGR of 20.26% over the years between 2014 and 2019 (businesswire.com, 2015). A similar growth trend has been expected in the Middle East, Africa and Latin America markets (Robinson, 2015). For growth economies, the need for infrastructure constantly increases and hence developing countries have been focusing more towards the development of power projects, roads and highways, oil exploration and such others (Robinson, 2015). So, Indian EPC firms had to compete with established global players to secure projects in the international markets of Middle East, Africa and Latin America (Bhattacharyya & Jha, 2017). Indian EPC firms not only had to execute projects within scheduled time, cost and quality, but the speed of execution had also become important in foreign markets (Singh, 2009).
Many researchers have argued in the past that Indian economy suffered from poor infrastructure, stretched to limits by the growing population and increasing regional and rural-urban economic disparities (e.g. Agrawal, 2015). Indian central and state governments had been unable to serve adequately the growing demands of the infrastructure required by the growing economy over the years (Nataraj, 2015; Agrawal, 2015). So, the concept of public-private partnership (PPP) was introduced (Singh, 2017). In India, the PPP concept has been said to be conceived in the pre-Independence era, with the introduction of private sterling investments in railroads and this was further boosted when the colonial government permitted PPP in power sector (Nagpal, 2016) and eventually private construction players came into existence (Nataraj, 2015). Li et al. (2015) pointed out that economic liberalization of the construction market had placed private contractors in a stronger market position. PPP model in the last couple of decades have become very popular (Singh, 2017; Nagpal, 2016).
Since the integration of global economies in 1950s, Chinese construction firms have been penetrating and contributing to overseas construction markets (Zhao, Shen & Zuo, 2009). Chinese international construction firms have successfully emerged as one of the strongest in the world over the years (Li et al., 2015). Chinese EPC firms had acquired a lead in African construction market (Zhao, Shen & Zuo, 2009; Li, et al., 2015). In India, the construction of the world's tallest statue of Sardar Vallabhbhai Patel (Statue of Unity) has also witnessed the participation of Chinese firms (FE Online, 2018). Furthermore, some of India's new infrastructure development programs such as integration of roads, railways, waterways and civil aviation have also caught the interest of many Chinese EPC firms to participate in India (Choudhury, 2017; Businessinsider.in, 2016).
Literature Review
The authors studied researches regarding the process of internationalization, its associated problems and how companies overcame the challenges. The authors further studied the methodology used by past researchers applied to study this domain. The findings associated with the extant research has been tabulated in Table 1.
Research Gaps & objectives
We found that there has not been an exhaustive analysis on Indian EPC firms' internationalization deliberating upon the challenges, reasons and drivers for internationalization. Some of the research papers had focused on individual firms and the strategies used by the firms while internationalizing (Sinha, 2015). Some studies did an overall analysis of the sector in a context (Bhattacharyya, 2018) but a comprehensive study of the internationalization process of EPC firms have not yet been done. Thus, there has been gaps in the knowledge regarding the process of internationalization and the challenges faced by Indian EPC firms. We researched on this aspect and studied the various reasons behind the process and the strategies undertaken by Indian EPC firms to overcome internationalization challenges. We carried out 25 in-depth personal interviews with various experts working in Indian EPC firms.
The research objectives were thus to:-
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Comprehend the internationalization effort of Indian EPC firms.
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Outline the challenges towards internationalization of Indian EPC players.
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Understand the motives for internationalization of Indian EPC firms.
Based upon the research objective, the research questions have been framed. these questions have been:
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What are the challenges of Indian EPC firms in internationalizing?
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Why Indian EPC firms internationalize?
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What is the nature of projects, where Indian EPC firms internationalize?
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In which decade the Indian EPC firms' internationalization was initiated?
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What was the method of Indian EPC firms' internationalization (JV, Direct, Acquisition, and Strategic Alliance)?
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What entry strategies were carried out for internationalization?
Methodology
Exploratory studies are carried out to examine the phenomenon for which extant literature is scarce. (Maxwell, 1996)...
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