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Journal ArticleDOI

How emerging market governments promote outward FDI: Experience from China

01 Jan 2010-Journal of World Business (JAI)-Vol. 45, Iss: 1, pp 68-79
TL;DR: In this article, the authors developed the logic that OFDI promotion policies set by emerging market governments are economically imperative and institutionally complementary to offsetting competitive disadvantages of emerging market enterprises in global competition.
About: This article is published in Journal of World Business.The article was published on 2010-01-01. It has received 950 citations till now. The article focuses on the topics: Emerging markets & Foreign direct investment.
Citations
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Journal ArticleDOI
TL;DR: In this paper, the authors evaluate the international location decisions made by public listed Chinese firms during the period 2006-2008, using a Poisson count data regression model, and categorize the firms into state-controlled and privately owned according to majority ownership.

636 citations

Journal ArticleDOI
TL;DR: In this article, the effect of state ownership on Chinese firms' foreign direct investment (FDI) ownership decisions is investigated, and the authors argue that state ownership creates the political affiliation of a firm with its home country government, which increases the firm's resource dependence on home-country institutions, while also influencing its image as perceived by host-country institutional constituents.
Abstract: This study investigates the effect of state ownership on Chinese firms’ foreign direct investment (FDI) ownership decisions. It adopts a political perspective to extend the application of institutional theory in international business research. Specifically, it examines firms’ heterogeneous responses to external institutional processes during foreign market entry, while taking into consideration the political affiliation of firms with the external institutions. We argue that state ownership creates the political affiliation of a firm with its home-country government, which increases the firm's resource dependence on home-country institutions, while at the same time influencing its image as perceived by host-country institutional constituents. Such resource dependence and political perception increase firms’ tendency to conform to, rather than resist, isomorphic institutional pressures. We tested our hypotheses using primary data for 132 FDI entries made by Chinese firms during 2000–2006, and we found that the effects of home regulatory, host regulatory and host normative pressures on a firm to choose a joint ownership structure were stronger when the share of equity held by state entities in the firm was high.

597 citations


Additional excerpts

  • ...The surge of Chinese outward FDI has attracted academic attention to investigate the characteristics of Chinese firms and their institutional environments that shape firms’ internationalization strategies (Child & Rodrigues, 2005; Deng, 2009; Luo et al., 2010; Rui & Yip, 2008)....

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  • ...Government support can grant firms resource advantages in overseas investment to compensate for their lack of firm-specific advantages (Luo et al., 2010; Rugman & Li, 2007)....

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  • ...Like many other emerging economy governments, the Chinese government exerts regulatory restrictions on outward FDI to safeguard state assets, to prevent capital flight, and to direct outward FDI in line with national interests (Cui & Jiang, 2010; Deng, 2004; Luo et al., 2010)....

    [...]

  • ...Reflecting the three main types of government support identified by Luo et al. (2010), this variable was measured by three items (a¼0.82) related to the levels of government financial, information, and diplomatic supports received by a firm for its outward FDI....

    [...]

  • ...Such regulatory restrictions are implemented through an administrative system in which the Ministry of Commerce is authorized as the primary government organization responsible for the approval and administration of the outward FDIs of firms (Deng, 2004; Luo et al., 2010)....

    [...]

Journal ArticleDOI
TL;DR: In this paper, an enriched typology of emerging economies with a focus on mid-range emerging economies, which are positioned between traditional emerging economies and newly developed economies, is proposed.
Abstract: This paper revisits and extends our earlier work (in 2005) in the pages of this journal. We argue that there is a need for more fine-grained understanding of the country context along two dimensions: (1) institutional development and (2) infrastructure and factor market development. Specifically, we propose an enriched typology of emerging economies with a focus on mid-range emerging economies, which are positioned between traditional emerging economies and newly developed economies. Then we examine new multinationals from these mid-range emerging economies that have internationalized both regionally and globally. We outline directions for further research based on this typology in terms of (1) government influence, (2) resource orchestration, (3) market entry, and (4) corporate governance regarding the internationalization strategy of these emerging multinationals from mid-range economies.

537 citations

Journal ArticleDOI
TL;DR: Theoretically into Central and Eastern Europe: Transactions, Resources, and Institutions as mentioned in this paper is a survey of the contributions of research in CEE to theoretical debates in business research, highlighting the need to develop a better understanding of the boundary conditions of scholarly theories of knowledge.
Abstract: In “Probing Theoretically into Central and Eastern Europe: Transactions, Resources, and Institutions,” we outlined the contributions of research in Central and Eastern Europe (CEE) to theoretical debates in business research. In this retrospective, we reflect upon the evolution of the field over the past decade. With the fading impact of CEE’s distinct shared history, we suggest that CEE best be analyzed as emerging economies, rather than as a distinct geographic entity. Emerging economy business research is converging on common themes and shared theoretical ideas, while identifying critical variations that constrain generalizations among and beyond emerging economies. This research thus highlights the need to develop a better understanding of the boundary conditions of scholarly theories of business knowledge. Over the past decade, the institution-based view has emerged from distinct intellectual traditions in institutional economics, organizational theory, and the analysis of business–government bargaining. Research in these converging lines of theorizing places contextual variations at the center of explanations of business phenomena around the world. We suggest that the institution-based view is evolving toward a paradigm, and offer suggestions on how to advance this research agenda further, in particular by exploring how firms engage with different sets of potentially conflicting institutions at multiple levels and locations.

534 citations

Journal ArticleDOI
TL;DR: In this paper, the authors explain the mechanisms through which government impacts the internationalization of emerging market enterprises (EMEs), and demonstrate that an important source of variation is the idiosyncratic manner in which EMEs are affiliated with government agencies.
Abstract: We explain the mechanisms through which government impacts the internationalization of emerging-market enterprises (EMEs). Rather than merely viewing internationalization as the result of differences in resource positions, we demonstrate that an important source of variation is the idiosyncratic manner in which EMEs are affiliated with government agencies. Although government involvement has a strong effect on international expansion, this effect is contingent upon the level at which the firm is affiliated with government and the degree of state ownership. Different types and levels of governments have different objectives, exert different institutional pressures on EMEs, and impact their willingness and ability to internationalize differently. Government involvement influences the level of overseas investment, its location (developed vs developing countries) and its type (resource- vs market-seeking). These effects depend on firms’ own resources and capabilities, suggesting that not all firms possess equal ability to internalize government-related advantages and respond to institutional pressures. By demonstrating that resource-based and institutional constructs are highly dependent on one another, we enhance understanding of how EMEs succeed in expanding overseas, and why governments matter.

532 citations

References
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Journal ArticleDOI
Christine Oliver1
TL;DR: The authors applied the convergent insights of institutional and resource dependence perspectives to the prediction of strategic responses to institutional processes, and proposed a typology of strategies that vary in active organizational resistance from passive conformity to proactive manipulation.
Abstract: This article applies the convergent insights of institutional and resource dependence perspectives to the prediction of strategic responses to institutional processes. The article offers a typology of strategic responses that vary in active organizational resistance from passive conformity to proactive manipulation. Ten institutional factors are hypothesized to predict the occurrence of the alternative proposed strategies and the degree of organizational conformity or resistance to institutional pressures.

7,595 citations

Journal ArticleDOI
TL;DR: In this paper, the authors present a springboard perspective to describe the internationalization of emerging market multinational corporations (EM MNEs), and discuss unique traits that characterize the international expansion of EM MNE, and the unique motivations that steer them toward internationalization.
Abstract: In this article, we present a springboard perspective to describe the internationalization of emerging market multinational corporations (EM MNEs). EM MNEs use international expansion as a springboard to acquire strategic resources and reduce their institutional and market constraints at home. In so doing, they overcome their latecomer disadvantage in the global stage via a series of aggressive, risk-taking measures by aggressively acquiring or buying critical assets from mature MNEs to compensate for their competitive weaknesses. We discuss unique traits that characterize the international expansion of EM MNEs, and the unique motivations that steer them toward internationalization. We further delineate peculiar strategies and activities undertaken by these firms in pursuit of international expansion, as well as internal and external forces that might compel or facilitate their propulsion into the global scene. We finally explain the risks and remedies associated with this international ‘springboarding’ strategy and highlight major issues meriting further investigation.

2,505 citations

Journal ArticleDOI
TL;DR: This paper investigated the determinants of Chinese outward direct investment and the extent to which three special explanations (capital market imperfections, special ownership advantages and institutional factors) need to be nested within the general theory of the multinational firm.
Abstract: This study investigates the determinants of Chinese outward direct investment (ODI) and the extent to which three special explanations (capital market imperfections, special ownership advantages and institutional factors) need to be nested within the general theory of the multinational firm. We test our hypotheses using official Chinese ODI data collected between 1984 and 2001. We find Chinese ODI to be associated with high levels of political risk in, and cultural proximity to, host countries throughout, and with host market size and geographic proximity (1984 to 1991) and host natural resources endowments (1992 to 2001). We find strong support for the argument that aspects of the special theory help to explain the behaviour of Chinese MNEs.

2,238 citations

Book
01 Jan 1981
TL;DR: In this article, the authors present a taxonomy of the United Kingdom's International Direct Investment Position in the mid-1970s and present a toolkit approach to evaluate the costs and benefits of Multinational Enterprises to host countries.
Abstract: Part 1: 1. The Distinctive Nature of the Multinational Enterprise. 2. Trade, Location of Economic Activity and the Multinational Enterprise: A Search for an Eclectic Approach. 3. Trade, Location of Economic Activity and the Multinational Enterprise: Some Empirical Tests. 4. Explaining Changing Patterns of International Production: In Support of the Eclectic Theory. 5. Explaining the International Direct Investment Position of Countries: Towards a Dynamic or Developmental Approach. 6. The UK's International Direct Investment Position in the Mid-1970s. Part 2: 7. Multinational Enterprises, Market Structure, Economic Power and Industrial Policy. 8. Multinational Enterprises and Domestic Capital Formation. 9. Multinational Enterprises, Locational Strategies and Regional Development. 10. Employee Compensation in US Multinationals and Indigenous Firms: An Exploratory Micro/Macro Analysis. 11. Multinational Enterprises and Trade Flows of Developing Countries. 12. The Consequences of International Transfer of Technology by Multinational Enterprises. Some Home Country Implications. Part 3: 13. Evaluating the Costs and Benefits of Multinational Enterprises to Host Countries: A 'Tool Kit' Approach. 14. Alternative Policy Prescriptions and the Multinational Enterprise. 15. Multinational Enterprises and the Challenge of the 1980s. Index.

1,424 citations

Journal ArticleDOI
TL;DR: In this article, the effect of political hazards on the choice of market entry mode varies across multinational firms based on the extent to which they face expropriation hazards from their potential joint-venture partners in the host country (the level of contractual hazards).
Abstract: This article posits that the effect of political hazards on the choice of market entry mode varies across multinational firms based on the extent to which they face expropriation hazards from their potential joint-venture partners in the host country (the level of contractual hazards). As political hazards increase, the multinational faces an increasing threat of opportunistic expropriation by the government. Partnering with host-country firms that possess a comparative advantage in interactions with the host-country government can safeguard against this hazard. However, as contractual hazards increase, the potential benefit to the joint-venture partner of manipulating the political system for it's own benefit at the expense of the multinational increases as well, thereby diminishing the hazard-mitigating benefit of forming a joint venture. A two-stage bivariate probit estimation technique is used to test these hypotheses on a sample of 3,389 overseas manufacturing operations by 461 firms in 112 countries. Copyright 2000 by Oxford University Press.

1,366 citations