Supply Chain Resilience with a Push? FDI, Institutions, and Lessons from China’s Dairy Sector

Resilience in critical supply chains, such as agri-food, is increasingly jeopardized by external shocks such as food safety incidents, localized climate change-induced weather events, or even geopolitical conflicts. Shocks are often exacerbated by factors such as high dependence on a limited number of local suppliers. What can make agri-food supply chains more resilient to shocks? Firms’ strategic decisions related to enhancing resilience are affected by supply chain (industry) institutions, which may entice firms to engage in “Escape FDI” (foreign direct investment). In contrast, we introduce the “Push FDI” concept, where policymakers realign institutions proactively, encouraging businesses in critical supply chains to diversify production and strengthen collaborations with international partners, fostering more resilient governance structures. Encouraging “Push FDI” depends on appropriate alignment by firms to host-country institutional pressures. Using the case of Chinese outward investment into dairy production outside China following the 2008 melamine scare, we present considerations of which institutions may be relevant to incentivizing “Push FDI,” along with how they may affect the business environment for firms, shaping the decisions managers face. This illustrates how policymakers looking to encourage resilience in agri-food supply chains can stimulate domestic firms possessing financial capacities to make supporting outward investments.