Entry mode and emerging market MNEs: An analysis of Chinese greenfield and acquisition FDI in the United States

Abstract

The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. ABSTRACTA growing theoretical literature on emerging market MNEs argues they use aggressive acquisitions, often to psychically distant, developed host countries, to obtain the strategic assets that they themselves lack. The use of acquisitions as the dominant entry mode for strategic asset seeking, therefore stands at heart of current EM MNE theorizing. To date, however, systematic empirical testing of the motivations for different entry modes by EM MNEs is limited. In this paper we address this gap by exploring the motivations for greenfield and acquisitions. For important methodological reasons we draw our sample from a single host (the United States) and source country (China). Our results are broadly supportive of the growing theoretical literature on EM MNEs, arguing acquisitions are the primary mode of strategic asset seeking in developed markets.

Seeking legitimacy: Chinese OFDI and domestic isomorphic pressures

“…Research on the OFDI of Chinese firms has highlighted that government support can confer resource advantages upon firms engaged in overseas investment, thus allowing them to offset their lack of competitive advantages (Buckley et al, 2007;Luo et al, 2010). However, Anderson and Sutherland (2015) find no statistically significant relationship between domestic institutional support and the asset-seeking investment encouraged by the Chinese government. Therefore, more research is needed to examine how government supports are transformed into firm's specific ownership advantages and how firms use these advantages in overseas markets.…”

Establishment mode choice by Chinese firms in Latin America: The role of host country‐specific experience and government official visits

“…As pointed out before, past studies addressing the influence of host country‐specific experience on establishment mode choice did not focus on emerging economies as home and host counties simultaneously. As for Chinese MNEs, only a few prior studies dealt with establishment mode choice (Anderson & Sutherland, ; Meyer et al, ; Quer, Rienda, & Andreu, ; Wu, Liu, & Huang, ). Among them, only that of Quer, Rienda, and Andreu () analyzed the influence of host country‐specific experience, reporting an insignificant result, although not considering emerging economies as specific destinations.…”

Catching up by hiring: The case of Huawei

“…According to the springboard perspective, the acquisition of foreign firms is the main means of accessing state-of-the-art knowledge (Luo & Tung, 2007), but there have been recent calls in the literature to shift the focus on other investment modes such as greenfield investments (Kumar, Singh, Purkayastha, Popil, & Gaur, 2019;Luo & Tung, 2018). Many scholars have assumed that acquisitions are made to obtain strategic assets such as technology and brands and that they can offer fast access to the business network of an acquired firm, while greenfield investments, which entail building facilities from scratch, have thus far been mainly ascribed to market-seeking motives (Anderson & Sutherland, 2015;Rui & Yip, 2008;Klossek, Linke, & Nippa, 2012). In this regard, Huawei is an atypical case, as it pursues knowledge-seeking strategies through the establishment of greenfield R&D subsidiaries, thus the analysis contributes to closing a gap in our understanding of mechanisms of greenfield investments in knowledge-seeking R&D internationalization (Anderson & Sutherland, 2015).…”

“…Unlike its experience in emerging markets, in the West Huawei came up against a hostile political climate, the US even accusing Huawei of espionage, an accusation some see as directed at the Chinese government (Cooke, 2012;Chung & Mascitelli, 2015). Just as it had stymied state-owned Chinese companies previously, the US government stood in the way of Huawei making acquisitions and barred it from bidding for national network projects, causing Huawei to focus on European, Canadian, and Australian markets (Anderson & Sutherland, 2015;Chung & Mascitelli, 2015;Nolan, 2014). Despite these roadblocks, by 2008 Huawei became the number one patent applicant at WIPO and in 2012 surpassed industry leader Ericsson in annual revenue (Lee et al, 2016).…”