Purpose
The paper aims to investigate outward foreign direct investment (OFDI) by Chinese state-owned enterprises (SOEs), aiming to unveil whether the Chinese OFDI policy acted as a country-specific advantage (CSA) that has been turned by Chinese firms, particularly SOEs, into a firm-specific advantage (FSA).
Design/methodology/approach
Using a data set spanning 18 years (1996-2013) on international mergers and acquisitions (IM&As) by Chinese companies (SOEs and private-owned enterprises – POEs) and drawing on extant literature, the paper systematically compares the behavior of Chinese SOEs and POEs, aiming to identify differences in their behavioral patterns that indicate that SOEs have benefitted more from policy-induced advantages than their private counterparts.
Findings
Among other aspects, significant differences were found regarding the behavior of SOEs vis-à-vis POEs that seem to show that SOEs had greater support from public entities, leading them to close larger deals and purchase more companies/stakes in cash; acquire firms with greater debt (implying higher interest payments); and purchase smaller stakes than POEs (indicating that there are other objectives than control). This lends support to the assumption that Chinese SOEs are “sitting on piles of cash”, and that the availability of capital acted as a CSA that has been transformed into an FSA by the companies involved, notably by SOEs.
Research limitations/implications
The comprehensive and large-scale data set used includes wholly owned SOEs, leaving out of this research partially owned SOEs. The findings of this paper have implications for the discussion on competitive neutrality and for the academic, managerial and public policy debate.
Originality/value
To the best of the authors’ knowledge, this is the only study, to date, that shows systematic differences in financing patterns of OFDI (notably via IM&As) by Chinese SOEs and POEs, among other behavioral characteristics of both types of companies when conducting FDI abroad, linking that to CSAs and FSAs induced by CSAs.
This chapter examines transparency in relation to inward foreign direct investment (FDI), particularly inward investment-focused policies and incentives. It begins by reviewing the literature on transparency and inward investment incentives before discussing some of the merits of transparency based on its effects on the quantity and quality as well as the process by which FDI is attracted. It then considers the distinction between transparency in norms versus transparency in processes and how these differences affect FDI attraction. It also explores multilevel transparency and its impact on inward investment, along with multiparty transparency and its effect on FDI. The chapter concludes by focusing on the relationship between multinational corporations and host countries.
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