The Internationalization of Chinese Firms: A Case for Theoretical Extension?

Abstract

This paper examines the patterns of, and motives for, internationalization by prominent market-seeking Chinese firms. Case studies of these firms indicate that they are seeking technological and brand assets to create a competitive position in international markets. While mainstream theory tends to assume that firms internationalize to exploit competitive advantages, Chinese firms are generally making such investments in order to address competitive disadvantages. They are engaging in ‘inward’ internationalization by means of original equipment manufacture (OEM) and joint venture partnerships, and ‘outward’ internationalization by means of acquisition and organic expansion abroad. Each of these routes offers certain benefits coupled with its own challenges or risks. The paper concludes that the Chinese case offers an opportunity to extend present theorizing in four primary areas concerning the latecomer perspective and catch-up strategies, institutional analysis with reference to the role of government, the relations between entrepreneurs and institutions, and the liability of foreignness.

Expanding to outward foreign direct investment or not? A multi-dimensional analysis of entry mode transformation of Chinese private exporting firms

“…However, prior studies all focus on DE firms that have ownership advantages and whose internationalisation activities seek to exploit FSRs which they already possess. EE firms in general, and Chinese firms in particular, do not have that sort of ownership advantage and their OFDI decisions are largely motivated by seeking strategic assets (Child & Rodrigues, 2005). In other words, Chinese firms invest overseas not mainly to exploit competitive advantages, but to redress their competitive disadvantages against their DE counterparts and engage in a catch-up strategy (Cui & Jiang, 2009 or to upgrade their position in the value chain or global production network.…”

“…For most of their international market forays, Chinese firms' internationalisation is still at an early stage and is primarily dominated by exporting (Child & Rodrigues, 2005;Liu, Buck & Shu, 2005). Exporting is a relatively lower business risk activity, requires fewer resource commitments, and has greater flexibility for managerial actions than OFDI.…”

“…The literature has repeatedly stressed, for example, the role of a supportive policy by the government (e.g. Child & Rodrigues, 2005;Deng, 2004Deng, , 2009Luo, Xue & Han, 2010;Voss, Buckley & Cross, 2010). Since China's formulation of the 'Go Global' policy, central and provincial governments have perceived OFDI positively and actively attempted to provide an institutional environment that enables Chinese firms to engage in OFDI.…”

Internalisation Theory and Outward Direct Investment by Emerging Market Multinationals

“…However, this changed with the liberalization efforts of the ''Go Global'' policy at the end of the 1990s. This key policy shift points to the need for better understanding of how the evolving institutional environment in China is moderating the internationalization strategies of domestic firms (Child and Rodrigues 2005).…”

Internationalization trajectories--a cross-country comparison: Are large Chinese and Indian companies different?

“…Since the 1990s, MNEs from emerging markets are rapidly increasing in size and number (cf Child and Rodrigues, 2005). The Primarily from South-east Asia (notably China, and to a lesser extent India), these ' dragon multinationals' (Mathews, 2002) or ' emerging market MNEs' (Luo and Tung, 2007) of the late 1990s are often considered to adopt substantially different internationalization strategies from either the latecomer developed country MNEs (Li, 2007), ' Third World' multinationals in the 1970s and 1980s (Lecraw, 1993;Wells, 1981, Lall, 1983, the Newly Industrialising Economy (NIE) multinationals from the 1990s, or the ' born-globals' that include smaller and medium sized corporations from developed countries (UNCTAD, 2006).…”