Foreign direct investment along the Belt and Road: A political economy perspective

Abstract

In 2013, China launched its ambitious Belt and Road Initiative (BRI), a large portfolio of infrastructure projects across 71 countries intended to link Eurasian markets by rail and sea. The state-led nature of the Initiative combined with its transformative geopolitical implications have conditioned the type of engagement that many governments and firms in host and third countries are willing to take in Chinese-funded BRI projects. Building on two theoretical streams that have originated in international political economy but have received growing attention in international business, varieties of capitalism and geopolitics, this perspective shows how a greater understanding of the institutional and geopolitical context surrounding BRI helps decipher the selection of host-country firms and third-country MNEs in Chinese-funded BRI projects. We portray firm selection in a BRI project as the outcome of a one-tier bargaining game between China and a host country. We show how institutions and geopolitics influence both the legitimacy gap of Chinese SOEs in a host country and the host country’s relative bargaining power, affecting the likelihood that host firms and third-country MNEs are selected in BRI projects. We also discuss the geopolitical jockeying strategies that these firms can adopt to influence the outcome of the bargaining game.

The Belt and Road Initiative and international business policy: A kaleidoscopic perspective

“…Second, scholars have homed in on the state capitalist nature of BRI. The Chinese central and regional governments have a heavy influence on multiple levels and on various aspects of the BRI (Li et al, 2022b ). They play a key role in selecting BRI projects and financing them with loans from Chinese state-owned policy banks, commercial banks, and sovereign wealth funds.…”

“…The effect is stronger in regions with higher marketization and is weaker when investing in BRI countries Huang, Shen, and Zhang ( 2022 ) Asia-Pacific Journal of Management Institutional theory Quantitative data; ordinary least squares regression Home government support has a positive impact on the performance of SOEs’ subsidiaries. This effect is weaker in countries that are cooperating with the BRI than in those that are not Li, Van Assche, Li, and Qian ( 2022b ) Journal of International Business Studies Varieties of capitalism; Geopolitics Conceptual Institutions and geopolitics influence both the legitimacy gap of Chinese firms in a host country and the host country’s relative bargaining power, affecting the likelihood that host firms and third-country MNEs are selected in BRI projects Mukhtar, Zhu, Lee, Bambacas, and Cavusgil ( 2022 ) International Business Review Social networks Qualitative interviews Acculturation experience, cross-cultural networking, networking behavior, and factors influencing cross-cultural adjustment, enhance the overall performance of BRI projects Wang, Li, and Wei ( 2022 ) Asia-Pacific Journal of Management Resource-based theory Quantitative data; panel data econometric model R&D intensity is identified as a burden and political ties as support for corporations’ short-term performance in BRI projects Wang and Liu ( 2022 ) Asia-Pacific Journal of Management Institutional theory, outward FDI Quantitative data; regression State equity of Chinese firms pushes their proactiveness in investing in BRI countries Yang, Wang, Liu, and Huang ( 2022 ) Asia-Pacific Journal of Management Institutional theory Quantitative data; difference-in-differences-method BRI exerts a positive effect on corporate social responsibilities of Chinese MNEs involved in the BRI and the effect is stronger for Chinese state-owned MNEs Zhang, Huang, Duan, and Li ( 2022 ) ...…”

“…More profoundly, however, much of the extant literature in IB has adopted a firm or industry perspective in the context of the BRI [with notable exception of the work by Lewis et al ( 2021 ) and Casas-Klett and Li ( 2022 )], an approach that might have unwittingly limited deeper interest into the topic. Indeed, of the 12 articles mentioned above, six have studied how organizational heterogeneities such as state ownership, political ties, and ethnicity influence a firm’s IB performance in the context of the BRI (Huang, Shen, & Zhang, 2022 ; Li et al, 2019 ; Li, Van Assche, Li & Qian, 2022b ; Sutherland, Anderson, Bailey, & Alon, 2020 ; Wang, Li, & Wei, 2022 ; Wang & Liu, 2022 ); two studies have evaluated firms’ CSR and green performance along the Belt and Road (Chen, Ning, Pan, & Xiao, 2022 ; Yang, Wang, Liu, & Huang, 2022 ); and two articles have studied the opportunities and challenges that the BRI presents to expatriates and workers (Mukhtar, Zhu, Lee, Bambacas, & Cavusgil, 2022 ; Zhang, Huang, Duan, & Li, 2022 ).…”

Speed of China’s OFDIs to the Belt and Road Initiative destinations: State equity, industry competition, and the moderating effects of the policy

“…To sustain domestic economic developments (Qian et al, 2018 ), governments tend to provide financial resources and favorable policies to push firms to expand internationally to acquire strategic assets and establish global competitiveness (Qian et al, 2018 ; Tang, 2019 ). Because state equity functions as the most legitimate and formal means for private firms to connect with governments (Li et al, 2021b ; Qian et al, 2018 ), a higher level of state equity should suggest a larger organizational amount of governmental support and a greater extent of interest alignments with the political agenda (Wang & Liu, 2021 ; Wang, Xie & Wang, 2015 ).…”

A bargaining and property rights perspective on the Belt and Road Initiative: Cases from the Italian port system

“…BRI might represent a means for China to favor the internationalization of its companies. However, its implementation has to be understood within the host country's political landscape; and its international geopolitical landscape but this is beyond the scope of the current paper (Li, Van Assche, Li, & Qian, 2021). IB scholars have used political ratings or the degree of political stability of the host country to represent the influence of the host country's political environment over foreign market entry (Delios & Henisz, 2003;Henisz & Zelner, 2010;Holburn & Zelner, 2010).…”