Publication: The Rise of the Micro-Multinational?

Foster, C.G. 2017 The Rise of the Micro-Multinational? Small Enterprises and Digital Platform Engagement in Emerging Economies. Paper presented at: SASE 2017, Lyon, France, 27th Jun.
[in progress – available on request]

Abstract

The notion of the micro-multinational
The term ‘micro-multinational’ was coined by eBay as part of research into its platform in 2013 (eBay, 2013a). The phrase highlights a new angle on the long held idea of internet-driven disintermediation by firms, but here the specific focus is on micro and small enterprises (MSE) who are engaging in e-business and e-commerce through platforms.

The basic idea is that MSE are increasingly using platforms as a core channel for trade, and when they do this on globalized platforms they find themselves (often unintentionally) exporting to all corners of the globe. These ideas are supported by growing research based on firm data from platforms which suggest that nearly all firms on platforms export to some extent. The share of export on these platform also moves away from a few ‘superstar’ exporters of traditional export theory to a wider set of often young firms (Hortaçsu et al., 2009; Lendle et al., 2016, 2013).

One of the most fascinating findings in this work on platforms is that these ideas of micro-multinationals do not only apply to MSE in the most developed nations. There are indications that small firms using platforms in emerging and developing countries display similar characteristics, and indeed may be even more likely to export than their counterparts in developed countries (eBay, 2013b; Lendle and Vézina, 2015). These (and similar ideas) have been taken up as a potential new avenue of economic- and trade-driven development by a number of tech firms such as Google and Alibaba, and are beginning to form the basis of new policy agenda (eBay, 2013a; Suominen, 2014).

Analysing MSE on platforms
Clearly, these ideas, and particularly their implications for emerging country MSE are interesting for those interested in economic development in the Global South. However, so far there has been a lack of research using qualitative approaches to dig down and verify the macro-claims of platform firms and econometric analysis. This is the goal of this paper. Firstly, to provide more detail on these claims around micro-multinationals, and secondly to more critically map out potential research and policy agendas.

The paper uses recent empirical research exploring the digitization of small firms in East Africa and a literature review on small enterprises and the digitization of value chains to explore micro-multinationals. This provides a more detailed analysis of MSE in developing and emerging nations and a clear understanding of their use of platforms.

Our research suggests that claims about micro-multinational have some veracity but may have been overplayed. Most firms that look to use platforms get caught-up in ‘low road’ strategies when they go online, where they face stiff global competition and struggle to differentiate themselves from many others online. Thus, whilst these firms might export a handful of orders online it is rarely sufficient to support firm survival.

However, the ideas of micro-multinationals does appear to align with the activities of a minority of small firms online who are emerging to cater for so-called niche activities, new markets and new demands. Expansion of customer interest in a long-tail of products, services (or intermediate products) is well known (Anderson, 2009), and we suggest that core value chains are increasingly unable to satisfy the idiosyncratic demands of long-tail customers, who then look to platforms for their demands. Often these niche demands are very small markets and hence each alone is unlikely to drive widespread economic development for a nation or region. Nevertheless together they do support the growth of a significant number of export-orientated firms and are worthy of further exploration. These firm might also potentially be innovative in the future, being better integrated with ICT and less anchored in uneven relationships compared to value chains.

We undertake a mapping of the key linkages and institutions related to these niche activities and highlight future research agenda and policy questions. We particularly connect this to the policy debates on export regulations, international payments and data protectionism that have been surfaced as part of the micro-multinational agenda.

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