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How emerging market governments promote outward FDI: Experience from China

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  • Luo, Yadong
  • Xue, Qiuzhi
  • Han, Binjie
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    Abstract

    Large scale outward foreign direct investment (OFDI) by emerging market enterprises has become common in today's business world. Nested within the political economy perspective, this article elucidates why and how emerging market governments enthusiastically stimulate OFDI. Drawing upon our detailed analysis of the Chinese context, we developed the logic that OFDI promotion policies set by emerging market governments are economically imperative and institutionally complementary to offsetting competitive disadvantages of emerging market enterprises in global competition. This study presents the governmental institutions that impact Chinese OFDI, discusses evolutionary changes of OFDI policies, and describes current policies and measures that stimulate Chinese companies to expand into the global market. This article concludes with theoretical and managerial discussions wherein we call for convergence between two seemingly paradoxical views - institutional escapism and governmental promotion - presently used as an institutional logic explicating international expansion of emerging market enterprises.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of World Business.

    Volume (Year): 45 (2010)
    Issue (Month): 1 (January)
    Pages: 68-79

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    Handle: RePEc:eee:worbus:v:45:y:2010:i:1:p:68-79

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    Keywords: Outward FDI Government policies Emerging markets China;

    References

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    1. Rui, Huaichuan & Yip, George S., 2008. "Foreign acquisitions by Chinese firms: A strategic intent perspective," Journal of World Business, Elsevier, vol. 43(2), pages 213-226, March.
    2. Jean J Boddewyn, 1988. "Political Aspects of MNE Theory," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 341-363, September.
    3. Alan M Rugman & Alain Verbeke, 1998. "Multinational Enterprises and Public Policy," Journal of International Business Studies, Palgrave Macmillan, vol. 29(1), pages 115-136, March.
    4. Henisz, Witold J, 2000. "The Institutional Environment for Multinational Investment," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(2), pages 334-64, October.
    5. Yadong Luo & Rosalie L Tung, 2007. "International expansion of emerging market enterprises: A springboard perspective," Journal of International Business Studies, Palgrave Macmillan, vol. 38(4), pages 481-498, July.
    6. Barry Naughton, 2007. "The Chinese Economy: Transitions and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640643, January.
    7. Yadong Luo, 2001. "Toward a Cooperative View of MNC-Host Government Relations: Building Blocks and Performance Implications," Journal of International Business Studies, Palgrave Macmillan, vol. 32(3), pages 401-419, September.
    8. Peter J Buckley & L Jeremy Clegg & Adam R Cross & Xin Liu & Hinrich Voss & Ping Zheng, 2007. "The determinants of Chinese outward foreign direct investment," Journal of International Business Studies, Palgrave Macmillan, vol. 38(4), pages 499-518, July.
    9. John Child & Suzana B. Rodrigues, 2005. "The Internationalization of Chinese Firms: A Case for Theoretical Extension?," Management and Organization Review, International Association of Chinese Management Research, vol. 1(3), pages 381-410, November.
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    Citations

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    Cited by:
    1. 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.
    2. Kling, Gerhard & Weitzel, Utz, 2011. "The internationalization of Chinese companies: Firm characteristics, industry effects and corporate governance," Research in International Business and Finance, Elsevier, vol. 25(3), pages 357-372, September.
    3. 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.
    4. German, Laura & Schoneveld, George & Mwangi, Esther, 2013. "Contemporary Processes of Large-Scale Land Acquisition in Sub-Saharan Africa: Legal Deficiency or Elite Capture of the Rule of Law?," World Development, Elsevier, vol. 48(C), pages 1-18.
    5. Klaus Meyer & Ornjira Thaijongrak, 2013. "The dynamics of emerging economy MNEs: How the internationalization process model can guide future research," Asia Pacific Journal of Management, Springer, vol. 30(4), pages 1125-1153, December.
    6. Gao, Lan & Liu, Xiaohui & Zou, Huan, 2013. "The role of human mobility in promoting Chinese outward FDI: A neglected factor?," International Business Review, Elsevier, vol. 22(2), pages 437-449.
    7. Diego Quer & Enrique Claver & Laura Rienda, 2012. "Political risk, cultural distance, and outward foreign direct investment: Empirical evidence from large Chinese firms," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 1089-1104, December.
    8. Xiao, Simon Shufeng & Jeong, Insik & Moon, Jon Jungbien & Chung, Chris Changwha & Chung, Jaiho, 2013. "Internationalization and Performance of Firms in China: Moderating Effects of Governance Structure and the Degree of Centralized Control," Journal of International Management, Elsevier, vol. 19(2), pages 118-137.
    9. Zhong, Weiguo & Peng, Jisheng & Liu, Chunlin, 2013. "Internationalization performance of Chinese multinational companies in the developed markets," Journal of Business Research, Elsevier, vol. 66(12), pages 2479-2484.
    10. Wang, Chengqi & Hong, Junjie & Kafouros, Mario & Boateng, Agyenim, 2012. "What drives outward FDI of Chinese firms? Testing the explanatory power of three theoretical frameworks," International Business Review, Elsevier, vol. 21(3), pages 425-438.
    11. Amighini, Alessia A. & Rabellotti, Roberta & Sanfilippo, Marco, 2013. "Do Chinese state-owned and private enterprises differ in their internationalization strategies?," China Economic Review, Elsevier, vol. 27(C), pages 312-325.
    12. Meyer, Klaus E. & Thein, Htwe Htwe, 2014. "Business under adverse home country institutions: The case of international sanctions against Myanmar," Journal of World Business, Elsevier, vol. 49(1), pages 156-171.
    13. 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.
    14. Svetlana Ledyaeva & Päivi Karhunen & John Whalley, 2013. "If Foreign Investment Is not Foreign: Round-Trip Versus Genuine Foreign Investment in Russia," Working Papers 2013-05, CEPII research center.

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