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Cognitive Distance and Obstacles to Subsidiary Business Success-The Experience of Chinese Companies in Germany

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  • Yuefang Si
  • Ingo Liefner

Abstract

The success of foreign direct investment (FDI) from developing countries to developed countries is critically dependent on managing the differences in the knowledge bodies of the regions and players involved. The theories that at least partly explain successful FDI of this kind use the terms cognitive distance and embeddedness. Most of the empirical research takes the perspective of regions and has addressed the problem of becoming embedded in the host regions. This paper takes the firm perspective and examines cognitive distance regarding not only the host region, but also the knowledge of the firms involved. It uses qualitative information from an extensive study of Chinese affiliates in Germany. In contrast to many other studies, this paper shows that a fast and successful process of becoming embedded in the host region can hamper the subsidiary's success, as it may cause conflict with the parent firm.

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  • Yuefang Si & Ingo Liefner, 2014. "Cognitive Distance and Obstacles to Subsidiary Business Success-The Experience of Chinese Companies in Germany," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 105(3), pages 285-300, July.
    • Handle: RePEc:bla:tvecsg:v:105:y:2014:i:3:p:285-300
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    2. Yuefang Si & Yi Zhang & Tangwei Teng, 2021. "R&D internationalization and innovation performance of Chinese enterprises: The mediating role of returnees and foreign professionals," Growth and Change, Wiley Blackwell, vol. 52(4), pages 2194-2212, December.
    3. Nádia Campos Pereira Bruhn & Juciara Nunes de Alcântara & Dany Flávio Tonelli & Ricardo Pereira Reis & Luiz Marcelo Antonialli, 2016. "Why Firms Invest Abroad? A Bibliometric Study on OFDI Determinants from Developing Economies," Global Business Review, International Management Institute, vol. 17(2), pages 271-302, April.
    4. Schott, Lennart & Schaefer, Kerstin, 2023. "Acceptance of Chinese latecomers' technological contributions in international ICT standardization — the role of origin, experience and collaboration," LSE Research Online Documents on Economics 116987, London School of Economics and Political Science, LSE Library.
    5. Jiatao Li & Maria Tereza Leme Fleury, 2020. "Overcoming the liability of outsidership for emerging market MNEs: A capability-building perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(1), pages 23-37, February.
    6. Kerstin J. Schaefer & Ingo Liefner, 2017. "Offshore versus domestic: Can EM MNCs reach higher R&D quality abroad?," Scientometrics, Springer;Akadémiai Kiadó, vol. 113(3), pages 1349-1370, December.
    7. Kerstin J. Schaefer, 2020. "Catching up by hiring: The case of Huawei," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(9), pages 1500-1515, December.
    8. Liefner, Ingo & Si, Yue-fang & Schäfer, Kerstin, 2019. "A latecomer firm's R&D collaboration with advanced country universities and research institutes: The case of Huawei in Germany," Technovation, Elsevier, vol. 86, pages 3-14.
    9. Zeng Gang & Zhang Yi & Cao Xianzhong, 2023. "Cross-Border knowledge pipelines and innovation performance of chinese firms: evidence from Zhangjiang in Shanghai," ZFW – Advances in Economic Geography, De Gruyter, vol. 67(1), pages 33-46, May.
    10. Bas Karreman & Martijn J. Burger & Frank G. van Oort, 2017. "Location Choices of Chinese Multinationals in Europe: The Role of Overseas Communities," Economic Geography, Taylor & Francis Journals, vol. 93(2), pages 131-161, March.

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