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What drives outward FDI of Chinese firms? Testing the explanatory power of three theoretical frameworks

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  • Wang, Chengqi
  • Hong, Junjie
  • Kafouros, Mario
  • Boateng, Agyenim
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    Abstract

    This study examines the forces driving outward FDI of emerging-market firms. Its contribution lies in integrating and testing insights from institutional theory, industrial organization economics and the resource-based view of the firm. This approach enables us to consider three different levels of analysis – firm, industry and country – and, thus, to distinguish between different sources of variation. Using a large firm-level Chinese dataset, we offer new evidence indicating that government support and the industrial structure of the home country of the investing firm play a crucial role in explaining outward FDI. By contrast, technological and advertising resources tend to be less important. The findings have important implications for theorizing. Although some firm-specific idiosyncrasies still play a role in explaining variations across firms in the same industry, the theoretical analysis and empirical results consistently indicate that foreign investment of Chinese firms is largely driven by their distinctive institutional and industrial environment.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 21 (2012)
    Issue (Month): 3 ()
    Pages: 425-438

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    Handle: RePEc:eee:iburev:v:21:y:2012:i:3:p:425-438

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    Keywords: China; Determinants; Emerging-market firms; Industry; Institution; Outward FDI; Resources;

    References

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    Cited by:
    1. Yi, Jingtao & Wang, Chengqi & Kafouros, Mario, 2013. "The effects of innovative capabilities on exporting: Do institutional forces matter?," International Business Review, Elsevier, vol. 22(2), pages 392-406.
    2. Sánchez-Sellero, Pedro & Rosell-Martínez, Jorge & García-Vázquez, José Manuel, 2014. "Absorptive capacity from foreign direct investment in Spanish manufacturing firms," International Business Review, Elsevier, vol. 23(2), pages 429-439.
    3. Piscitello , Lucia & Rabellotti , Roberta & Scalera , Vittoria Giada, 2014. "Chinese and Indian M&As in Europe: The relationship between motive and ownership choice," CIRCLE Electronic Working Papers 2014/3, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    4. Lu, Jiangyong & Liu, Xiaohui & Filatotchev, Igor & Wright, Mike, 2014. "The impact of domestic diversification and top management teams on the international diversification of Chinese firms," International Business Review, Elsevier, vol. 23(2), pages 455-467.
    5. Wei, Yingqi & Zheng, Nan & Liu, Xiaohui & Lu, Jiangyong, 2014. "Expanding to outward foreign direct investment or not? A multi-dimensional analysis of entry mode transformation of Chinese private exporting firms," International Business Review, Elsevier, vol. 23(2), pages 356-370.
    6. Stoian, Carmen, 2013. "Extending Dunning's Investment Development Path: The role of home country institutional determinants in explaining outward foreign direct investment," International Business Review, Elsevier, vol. 22(3), pages 615-637.

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