INTERNATIONAL OPERATIONS IN CHINA

International Operations in China

International Operations in China

Introduction

According to the 2008 World Investment Report, the growth rate of outward Foreign Direct Investments (FDI) by companies from emerging markets has outpaced that recorded by companies from industrialized countries. In particular, over the past two decades, Chinese multinationals (MNEs) have made a huge amount of foreign direct investment abroad, making China the largest outward investor of the top ten emerging countries. Chinese multinationals are present also in the top 500 Fortune companies (WIP, 2006). Recently some authors have examined the uniqueness of Chinese multinational enterprises from various theoretical perspectives (Henry and Albert, pp. 78-81). Child and Rodriguez (2005) and Rui and Yip (2008) developed the strategic intent view, suggesting that outward investments by Chinese MNEs is a proactive pursuit in search of strategic assets that redress their competence deficiencies. Yamakawa, Peng, and Deeds (2008), unveiled the institutional escapism notion, post-ulating that Chinese MNEs go global to avoid poor institutional environments at home. Deng (2004) offered the government steward logic, arguing that outward investment is a political mandate for Chinese MNEs to acquire scarce natural resources needed for economic and social development of their home countries. Finally, Luo and Rui (2009) describe an ambidexterity perspective of the internationalization of Chinese MNEs affirming that all the determinants defined by the above mentioned studies are able to explain the motivations that induce Chinese companies investing abroad.

Probably the problem is that many authors explain the internationalization of Chinese MNEs adopting the mainstream literature on multinationals' development. Nevertheless the remarkable development of Chinese companies cannot be explained by adopting the traditional internationalization theories based on the concept of ownership advantage. In fact, whilst some Chinese firms are developing particular ownership advantages becoming world leaders in specific industries (such as Cosco); many Chinese companies continue to be smaller and lacking in resources when compared to their foreign competitors. On the basis of these considerations, to explain the international expansion of Chinese MNEs seems necessary, first of all, to overcome the traditional International Business Theories and to build a new theoretical framework.

Consequently, the aim of this paper is to describe the determinants that induce Chinese companies to realize FDIs and the characteristics that distinguish their internationalization strategy from those adopted by developed countries multinationals (Doka, pp. 59-87).

Discussion

Over the past two decades, Chinese multinationals have made a huge amount of foreign direct investments abroad, making China the largest outward investor among top ten emerging countries. The peculiarities of Chinese investment are that they are directed both towards other developing countries and towards advanced economies and that they regard both lower end industries and higher-value adding activities. This remarkable development of Chinese companies cannot be explained adopting the traditional internationalization theories based on the concept of ownership advantage. In fact, some Chinese companies are smaller and lacking in resources when compared to their foreign competitors and the Chinese context has particular characteristics which can increase the difficulties for the local firms to compete in the world ...