Rethinking the Literature on the Performance of Chinese Multinational Enterprises

Abstract

We synthesize the literature on Chinese multinational enterprises (MNEs) and find that much of the prior research is based on as few as a dozen case studies of Chinese firms. They are so casespecific that it has led to a misplaced call for new theories to explain Chinese firms' internationalization. In an attempt to better relate theory with empirical evidence, we examine the largest 500 Chinese manufacturing firms. We aim to find out the number of Chinese manufacturing firms to be true MNEs by definition, and to examine their financial performance relative to global peers using the financial benchmarking method. We develop our theoretical perspectives from new internalization theory. We find that there are only 49 Chinese manufacturing firms to be true MNEs, whereas the rest is purely domestic firms. Their performance is poor relative to global peers. Chinese MNEs have home country bound firmspecific advantages (FSAs), which are built upon home country-specific advantages (home CSAs). They have not yet developed advanced management capabilities through recombination with host CSAs. Essentially, they acquire foreign firms to increase their sales in domestic market, but they fail to be competitive internationally and to achieve superior performance in overseas operations. Our findings have important strategic implications for managers, public policy makers, and academic research.

Impact of Political Connection Strength on the Internationalization Outcome of Chinese Firms: Perspectives from Market Exploration and Technology Acquisition

“…Political connection strength has a more significant moderating effect on international technology acquisition than on international market exploration, which may be because the Chinese government appears to be more successful in assisting domestic firms to acquire international technology. Chinese firms are mostly uncompetitive in innovation capability [44]. To compensate for this disadvantage, the Chinese government enacted many policies and support strategies to facilitate domestic firms' acquisition of technology from developed countries to ensure the sustainability of firms' internationalization and performance.…”

“…As Chinese firms are getting accustomed to using their political connection as an important institutional advantage, they have higher organizational capacity to manage policy risks and are less sensitive to the risks associated with other countries' policies. Considering the large segment of the international market that is usually accompanied by high risks, Chinese firms recently appear to be more aggressive, compared with the cautious attitudes of MNCs from developed countries [6,7,44].…”

Local responsiveness strategy of foreign subsidiaries of Chinese multinationals: The impacts of relational-assets, market-seeking FDI, and host country institutional environments

“…In addition, the liabilities of origin create post-entry disadvantages for foreign subsidiaries of Chinese MNEs due to the negative institutional heritage and the undesirable image as perceived by various host country stakeholders (Luo & Tung, 2007;Meyer, Ding, Li, & Zhang, 2014;Wang, Luo, Lu, Sun, & Maksimov, 2014). In this study, we argue that local responsiveness strategy is particularly important for foreign subsidiaries of Chinese MNEs, assisting them in overcoming the liabilities of origin in global competition (Rugman et al, 2016;Wei & Nguyen, 2017).…”

“…Second, local responsiveness strategy requires subsidiaries to maximize delegated autonomy so that they can tap into local resources and assist them in adapting products and services to satisfy local markets and regulatory requirements (Birkinshaw, 2000;Rugman & Verbeke, 2003). Accordingly, foreign subsidiaries undertake initiatives to build strong corporate governance and their own reputation and legitimacy in local operations (Birkinshaw, 2014;Rugman et al, 2016). Such a local embeddedness enables foreign subsidiaries of Chinese MNEs to disassociate themselves from their parent firms' negative institutional heritage (deriving from the home country of origin) so that they become more locally accepted (Wang et al, 2014;Wei & Nguyen, 2017).…”

Vicarious Learning: How Entrepreneurs Enhance a Firm’s International Competitiveness Through Learning From Interlocking Director Network Partners

“…First, there is rapid growth of new ventures in China, and most of them are eyeing overseas markets to improve their firm's competitiveness (Wang et al, 2012;Alon et al, 2018). Second, Chinese companies stay in the initial process of internationalization, thus entrepreneurs face much pressure and uncertainties to deal with liabilities of newness and foreignness (Child and Rodrigues, 2005;Peng, 2005;Rugman et al, 2016). Last, an interlocking director network is intensive and widespread among Chinese companies (Peng and Luo, 2000;Li et al, 2013), which exerts a significant influence on the firm's decision and performance.…”