Emerging economies can be understood as those rapid growth countries with low-income that utilises economic liberalisation as the major factor of growth. The emerging economies must satisfy two criteria namely rapid economic growth and government policies that favour economic liberalisation and implementation of free-market system (Hoskisson & Et. Al., 2000). The countries that are reforming their economies along the market-oriented lines, offering various opportunities in trade, technology transfers as well as foreign direct investments are known as emerging countries. According to the World Bank, China, India, Indonesia, Brazil and Russia are the five biggest emerging countries. Furthermore, there are other countries such as Mexico, Poland, Turkey, South Korea, South Africa and Argentina. It is worth mentioning that each of the countries are vital as an individual markets and the effort put on by each of the economy collectively may assist in changing the face of the global economics and politics (Li, 2011). It is quite important to comprehend the reason behind the creation of emerging markets. There are two reasons: one being the state-led economic development and the other being the need for capital investment. At the outset, the state-led economic development could not produce sustainable growth in the traditional developing countries that forced these countries to adopt open door policies. Secondly, capital was required by the developing countries in order to finance their development. However, the traditional government borrowing didn’t permit the development process. It has been evident from the past records that the developing countries were not able to manage the borrowed funds well and in an efficient manner in order to support their economic growth. Therefore, as a result they started to rely on equity investments in order to finance their economic growth. They seek to attract the equity investment from the private investors in order to partner with them. However, in order to attract the equity financing, it is quite important to create a favourable climate for the foreign investors. Therefore, this change in the financing sources was another factor that led to rise of the emerging markets (Li, 2011). It can be noted that there has been change in the traditional view of the development with the rise in the emerging markets. The first thing to note is that the foreign investment is replaced by foreign assistance. In the recent times, it can be said that the investment in the emerging market is not associated with the traditional notion of providing developmental assistance to the poorer countries. It has further been noted that the emerging markets are lessening their trade relations with the industrialised nations and are more directed towards new market opportunities. With the surmounting two-way capital flows and trade among the emerging markets as well as industrialised countries, it generally demonstrates the change from dependency to global interdependency. In addition, it has further been noted that with the emergence of the internet, the accelerated information exchange is integrating the emerging ...
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