OFDI promotion policies in emerging economies: the Brazilian and Chinese strategies

Abstract

Purpose – This paper aims to analyze how the Brazilian and Chinese outward foreign direct investment (OFDI) policies can contribute to the economic development of their home countries. Design/methodology/approach – The aforementioned objective is achieved through a comparative analysis of the Brazilian and Chinese OFDI policies within a new theoretical framework for examining the developmental implications of OFDI. Both primary and secondary data are utilized to compare Brazilian and Chinese strategies. Findings – It was concluded that Brazil and China have shifted from a development strategy centered on internal market self-sufficiency to one that seeks international economic prominence by, among other strategies, adopting OFDI support as a part of their industrial policy agenda. However, while the Chinese Government has focused on cross-national acquisitions of assets that are scarce within the country, the Brazilian Government has preferred to support industries that are already highly competitive internationally. The Chinese strategy has a greater potential to generate positive spillovers to domestic economy. Social implications – This paper ends with recommendations on how Brazil, in particular, and emerging economies, in general, may improve their OFDI policies. Originality/value – The contribution of this paper to the existent literature relies both on its approach and on its theoretical framework. Differing from the majority of the studies on the internationalization of companies from emerging economies, this paper emphasizes the importance of industrial policies to support OFDI and the developmental dimension of these policies. The authors believe that the theoretical framework developed here can be extended to further analysis of OFDI policies from other emerging economies. Policymakers may also benefit from the conclusions of this research.

The influence of home-country resources and state ownership on subsidiary’s performance: a multilevel perspective

“…For instance, accessible credits from development banks (e.g. BNDES) exert influence as a government policy (Caseiro and Masiero, 2014; Pineli and Narula, 2023). Hence, governments should formulate more effective mechanisms and policies for overseas expansion instead of politically intervening in SOEs (Zhang et al , 2022).…”

“…Second, since the 2000s, government banks, such as the Brazilian National Development Bank (BNDES), have influenced the growth of "National Champions" (Lazzarini et al, 2015). This was a type of government policy instrument (Pineli and Narula, 2023) that prioritized flagship companies from different Home-country resources and state ownership sectors, such as meat companies, construction, and petrochemicals (Caseiro and Masiero, 2014). A similar move emerged in other countries (e.g.…”

China’s OFDI support mechanisms in Germany: how governments can work together to promote SME internationalization, reduce liability of foreignness and contribute positively to society

“…However, the role of institutions in IB requires a nuanced perspective that takes the effects of institutional diversity on domestic and foreign levels into account (Aguilera and Grøgaard, 2019; Bruton et al , 2010). As illustrated in the introduction, previous works that explore the role of home country OFDI-support institutions on SME internationalization either focus on the domestic level in China or are situated in different EM or theoretical contexts (Caseiro and Masiero, 2014; Luo et al , 2010; Sun et al , 2015; Yan et al , 2020; Wang et al , 2012a). However, these perspectives are not able to fully explain the phenomenon in the particular context of China.…”

“…In the fostering domain, earlier works mainly investigated how Chinese state organizations promote OFDI of its SMEs on a domestic level. Existing IB studies have examined how, for example, China’s State Council or the Ministry of Commerce (MOFCOM) promote Chinese OFDI via different domestic levels, policy instruments and support processes and how this contributes to China’s economic development (Bernasconi-Osterwalder et al , 2012; Buckley et al , 2008; Caseiro and Masiero, 2014; Li, 2009; Luo et al , 2010; Wang et al , 2009; Wang et al , 2012a). Sun et al (2015) investigated domestic Chinese organizations and the role home country institutional open access plays in firms’ international expansion within different Chinese regions, confirming the fostering perspective (Wan and Hoskisson, 2003).…”

Assessing the effects of policies on China’s outward foreign direct investment

“…Supportive policies are believed to be vital in emerging countries such as China, as they aim to compensate for the disadvantages that firms encounter when investing abroad (Luo et al, 2010). In the context of China, existing studies show that supportive policies are a significant driver of OFDI at the national level (Carlos Zalaf Caseiro & Masiero, 2014;Deng, 2013;Gaur, Ma, & Ding, 2018;Lu et al, 2011;Luo et al, 2010). We would argue that by the nature of their objectives and related interventions, Supportive Policies are exemplary of the intentional government-created advantage that a pro-OFDI government can build to help business along the internationalisation process (Ramamurti & Hillemann, 2018).…”