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A new tale of two cities: Japanese FDIs in Shanghai and Beijing, 1979-2003

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  • Ma, Xufei
  • Delios, Andrew

Abstract

Transitional economies can be characterized by considerable sub-national variation in economic and political characteristics. We investigate how this variance influences the timing of entry, entry mode, industrial traits, and survival rates for Japanese foreign direct investments (FDIs) made in China's two major metropolises--Shanghai, the economic center, and Beijing, the political capital. Using a sample of 1610 subsidiaries of Japanese firms established during the 1979-2003 period, our empirical results show that Japanese multinational enterprises (MNEs) tended to choose an economic-oriented rather than a political-oriented city as their investment location, with the consequence being higher survival likelihoods in Shanghai than in Beijing. This location choice helped Japanese firms avoid policy uncertainty and political hazards in China's transition economy. Our findings highlight the point that fundamental features of institutional environments at sub-national levels should be analyzed when looking at investment strategy and performance in transitional economies.

Suggested Citation

  • Ma, Xufei & Delios, Andrew, 2007. "A new tale of two cities: Japanese FDIs in Shanghai and Beijing, 1979-2003," International Business Review, Elsevier, vol. 16(2), pages 207-228, April.
  • Handle: RePEc:eee:iburev:v:16:y:2007:i:2:p:207-228
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    1. repec:eee:iburev:v:26:y:2017:i:3:p:555-565 is not listed on IDEAS
    2. von Eije, Henk & Wiegerinck, Hélène, 2010. "Shareholders' reactions to announcements of acquisitions of private firms: Do target and bidder markets make a difference?," International Business Review, Elsevier, vol. 19(4), pages 360-377, August.
    3. Lei, Han-Sheng & Chen, Yung-Shuan, 2011. "The right tree for the right bird: Location choice decision of Taiwanese firms' FDI in China and Vietnam," International Business Review, Elsevier, vol. 20(3), pages 338-352, June.
    4. Surdu, Irina & Mellahi, Kamel, 2016. "Theoretical foundations of equity based foreign market entry decisions: A review of the literature and recommendations for future research," International Business Review, Elsevier, vol. 25(5), pages 1169-1184.
    5. repec:eee:intman:v:23:y:2017:i:3:p:292-305 is not listed on IDEAS
    6. Buckley, Peter J., 2011. "The theory of international business pre-Hymer," Journal of World Business, Elsevier, vol. 46(1), pages 61-73, January.

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