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Technological capabilities and international production strategy of firms: the case of foreign direct investment in China

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  • Shi, Yizheng

Abstract

In this paper, the author highlights the differing motives behind direct foreign investment (FDI) made by (1) large transnational corporations (TNCs) from industrial countries, and (2) small manufacturing firms from newly industrializing economies (NIEs). The basic premise is that TNCs that command sophisticated technologies wish to produce in China to exploit their technological advantages by gaining access to potentially substantial Chinese domestic markets. However, small firms from NIEs such as Hong Kong use more mundane technologies. They are more interested in using low cost inputs, such as labor and land in China, so that they can continue to export manufactured goods to third countries, thus avoiding rising input costs in their own domestic economies. The discussion is supported by the results of a survey and interviews with executives from both large TNCs and small NIE firms active in PRC.

Suggested Citation

  • Shi, Yizheng, 2001. "Technological capabilities and international production strategy of firms: the case of foreign direct investment in China," Journal of World Business, Elsevier, vol. 36(2), pages 184-204, July.
    • Handle: RePEc:eee:worbus:v:36:y:2001:i:2:p:184-204
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    Cited by:

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    2. Ingo Liefner & Stefan Hennemann & Lu Xin, 2006. "Cooperation in the Innovation Process in Developing Countries: Empirical Evidence from Zhongguancun, Beijing," Environment and Planning A, , vol. 38(1), pages 111-130, January.
    3. Li, Chengguang & Parboteeah, K. Praveen, 2015. "The effect of culture on the responsiveness of firms to mimetic forces: Imitative foreign joint venture entries into China, 1985–2003," Journal of World Business, Elsevier, vol. 50(3), pages 465-476.
    4. Ingo Liefner & Yehua Dennis Wei & Gang Zeng, 2013. "The Innovativeness and Heterogeneity of Foreign-Invested High-Tech Companies in Shanghai," Growth and Change, Wiley Blackwell, vol. 44(3), pages 522-549, September.
    5. Nassimbeni, Guido & Sartor, Marco, 2007. "Sourcing in China: a typology," International Journal of Production Economics, Elsevier, vol. 107(2), pages 333-349, June.
    6. Jing Yang & Frank Tipton & Jiatao Li, 2011. "A review of foreign business management in China," Asia Pacific Journal of Management, Springer, vol. 28(3), pages 627-659, September.
    7. Tsu-Lung Chou & Jung-Ying Chang & Te-Chuan Li, 2014. "Government Support, FDI Clustering and Semiconductor Sustainability in China: Case Studies of Shanghai, Suzhou and Wuxi in the Yangtze Delta," Sustainability, MDPI, vol. 6(9), pages 1-27, August.
    8. Yu, Jiang & Liu, Rui & Chen, Feng, 2020. "Linking institutional environment with technological change: The rise of China's flat panel display industry," Technological Forecasting and Social Change, Elsevier, vol. 151(C).
    9. Akinkugbe, Oluyele, 2003. "Flow of Foreign Direct Investment to Hitherto Neglected Developing Countries," WIDER Working Paper Series 002, World Institute for Development Economic Research (UNU-WIDER).
    10. Orlando R. Villaverde, 2010. "A Macroeconomic Approach to Foreign Direct Investment (FDI) Inflow from the People's Republic of China to Cuba," Annual Proceedings, The Association for the Study of the Cuban Economy, vol. 20.
    11. repec:jes:wpaper:y:2012:v:4:p:141-151 is not listed on IDEAS
    12. Hennemann Stefan & Liefner Ingo, 2006. "Kooperations- und Innovationsverhalten von chinesischen Hochtechnologieunternehmen," ZFW – Advances in Economic Geography, De Gruyter, vol. 50(1), pages 58-71, October.
    13. Tang, Mingfeng & Hussler, Caroline, 2011. "Betting on indigenous innovation or relying on FDI: The Chinese strategy for catching-up," Technology in Society, Elsevier, vol. 33(1), pages 23-35.
    14. Laura Diaconu, 2012. "Business Strategies Of The Multinational Corporations," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 4(2), pages 141-151, June.
    15. Arvanitis, Rigas & Zhao, Wei & Qiu, Haixiong & Xu, Jian-niu, 2006. "Technological learning in six firms in Southern China: success and limits of an industrialisation model," MPRA Paper 18553, University Library of Munich, Germany, revised 2006.

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