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Seeking Competitive Advantage in an Emergent Open Economy: Foreign Direct Investment in Chinese Industry

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  • I Eng
  • Y Lin

Abstract

In this paper we explore how foreign investors penetrate China's reforming economy and seek to build a competitive edge for their operations in local and international markets. Basing our study on a comparative analysis of the locational, sectoral, and organizational characteristics and performance variation of industrial firms invested by overseas Chinese and other foreign capital, we posit that effective manipulation of state action holds a key to the economic success of foreign-invested firms in post-Mao China. The role of social networks in influencing the selection and outcomes of foreign investors' strategies, which is emphasized by some existing studies, should be assessed not only in terms of its importance to market transactions, but more importantly, in terms of its utility in gaining ad hoc redistributive advantages and minimizing or containing unfavorable treatments from the still potent yet increasingly porous and localized state apparatus. Disaggregate data from a national industrial firm data set and a survey on the investment activities of Hong Kong manufacturers in China are used to test hypotheses derived from case-study findings with respect to three existing perspectives on the subject.

Suggested Citation

  • I Eng & Y Lin, 1996. "Seeking Competitive Advantage in an Emergent Open Economy: Foreign Direct Investment in Chinese Industry," Environment and Planning A, , vol. 28(6), pages 1113-1138, June.
    • Handle: RePEc:sae:envira:v:28:y:1996:i:6:p:1113-1138
    DOI: 10.1068/a281113
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    References listed on IDEAS

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    1. Kamath, Shyam J, 1990. "Foreign Direct Investment in a Centrally Planned Developing Economy: The Chinese Case," Economic Development and Cultural Change, University of Chicago Press, vol. 39(1), pages 106-130, October.
    2. Granick, David, 1990. "Chinese State Enterprises," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226305882, September.
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    Cited by:

    1. Sevkiye Sence Turk & Lale Berkoz, 2000. "Locational Determinants of Foreign Investment Firms in Turkey," Regional and Urban Modeling 283600096, EcoMod.
    2. Thompson, Edmund R., 2002. "Clustering of Foreign Direct Investment and Enhanced Technology Transfer: Evidence from Hong Kong Garment Firms in China," World Development, Elsevier, vol. 30(5), pages 873-889, May.
    3. Lale Berkoz & Sevkiye Sence Turk, 2005. "Factors Influencing The Choice Of Fdi Locations In Turkey," ERSA conference papers ersa05p434, European Regional Science Association.
    4. Roger Hayter & Sun Sheng Han, 1998. "Reflections on China's Open Policy Towards Foreign Direct Investment," Regional Studies, Taylor & Francis Journals, vol. 32(1), pages 1-16.
    5. Sevkiye Sence Turk & Lale Berkoz, 2005. "A Spatial Model Of Change Of Fdi Firm Population In Istanbul," ERSA conference papers ersa05p437, European Regional Science Association.
    6. 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.

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