Chinese Multinationals' Outward Foreign Direct Investment: An Institutional Perspective and the Role of the State

4th China Goes Global Conference, Harvard University

36 Pages Posted: 15 Nov 2010 Last revised: 15 May 2014

See all articles by Bing Ren

Bing Ren

Nankai School of Business

Hao Liang

Singapore Management University - Lee Kong Chian School of Business

Ying Zheng

affiliation not provided to SSRN

Date Written: April 26, 2010

Abstract

In this study we provide a novel analysis on the motivations and strategies of the outward foreign direct investment (OFDI) by Chinese multinational firms under the state-centric economic development approach. Previous studies suggest that the OFDI motivations and strategies of firms from emerging economies are different from that of firms from developed economies, and mainly focus on their strategic decisions on the internationalization under firm-level advantages. In this article we present a country-level institutional perspective to describe Chinese multinational firms’ OFDI with great emphasis on the role of state. The formal institutional determinants such as state policy, administrative system and government ownership, as well as the informal institutional determinants such as state ideology and national pride derived from China’s unique state-centric approach are discussed. We argue that such formal and informal institutions have shaped Chinese multinationals’ motivations of pursuing political objectives, enhancing global competence and escaping from domestic institutional constraints in pursuit of investing overseas. We further delineate how these institutional environments and motivations result in Chinese multinationals’ peculiar strategic choice in the OFDI entry mode, geographical distribution and target industry.

Keywords: outward foreign direct investment, state-centric economic development approach, the role of state, formal and informal institutions

JEL Classification: F23, G38, O17

Suggested Citation

Ren, Bing and Liang, Hao and Zheng, Ying, Chinese Multinationals' Outward Foreign Direct Investment: An Institutional Perspective and the Role of the State (April 26, 2010). 4th China Goes Global Conference, Harvard University. Available at SSRN: https://ssrn.com/abstract=1603763

Bing Ren

Nankai School of Business ( email )

94 Weijin Road, Nankai District
Tianjin, Tianjin 300071
China

Hao Liang (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

HOME PAGE: http://business.smu.edu.sg/faculty/profile/130396/LIANG-Hao

Ying Zheng

affiliation not provided to SSRN ( email )

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