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internationalization and privatization (Cuervo and Villalonga, 2000). In other cases the capability upgrading process can follow international expansion. This can happen in regulated industries, where firms face strong incentives to commit large amounts of resources and to establish operations quickly, whenever and wherever opportunities arise, and frequently via acquisition as opposed to greenfield investment (Sarkar et al., 1999, García-Canal and Guillén, 2008). As opportunities for international expansion in these industries depend on privatization and de-regulation, some firms lacking competitive advantages expand abroad on the basis of free cash-flows as opportunities arise. As noted above, horizontal investments seemed to pose a challenge to established theories of the MNE. The literature had emphasized since the late 1950s that MNEs in general undertake horizontal investments on the basis of intangible assets such as proprietary technology, brands, or know-how. The early literature on the new multinationals, simply assumed that firms from developing or newly industrialized countries lacked the kind of intangible assets characteristic of American, Japanese or European multinationals (Lall 1983:4). In fact, study after study found that the new multinationals scored lower on technology, marketing skill, organizational overhead, scale, capital intensity and control over foreign subsidiaries than their rich-country counterparts (e.g. Lecraw 1977; Lall 1983; Wells 1983).

Still, horizontal investments cannot be explained without the presence intangible assets of some sort. Table 3 summarizes the main types of intangible assets possessed by the new MNEs, as reflected in the existing literature. During the 1970s and 80s, the scholarly attention focused on capabilities such as the adaptation of technology to the typically smaller-scale markets of developing and newly industrialized countries, their cheaper labor, or imperfect input markets (Lecraw 1977; Lall 1983; Heenan and Keegan 1979, Ferrantino 1992; Tolentino 1993). Consumer-good MNEs from these countries were also found to possess a different kind of

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