The Effects of the Institutional Environment on the Internationalization of Chinese Firms - Part 5

Some recent high-profile international acquisitions and takeover bids by Chinese companies have reflected their improved competency in managing corporate activities across national borders. For example, on December 7, 2004, Lenovo agreed to pay IBM US $650 million in cash and US $600 million in stocks and assume US $500 million in debt to acquire IBM's personal computer (PC) business. The transaction — the first merger ever of a major US corporation and a top Chinese company — expanded Lenovo's PC business fourfold, giving it an annual income of about US $12 billion (Asia Times Online, March 11, 2005).

Studies on Chinese MNCs

With rapidly growing outward FDI from China, the newly emerging Chinese players in the global markets have prompted an upsurge in research interest. However, empirical studies on the process of internationalization and strategies used by Chinese firms are still scattered (Yiu, et al., 2007).

The early studies on China's outward FDI (e.g., Wall, 1997; Zhan, 1995) focused on government policy issues, that is, how government policies influence the growth of outward FDI by Chinese firms. Wu and Chen (2001) outlined the historical development of China's outward FDI by examining the companies' motivations, industries, and geographical distribution. They noticed that the motivations for Chinese outward FDI shifted from being driven by political reasons in the early stages to market seeking and asset exploitation. These early studies were conducted at the national level, while little attention was paid to firm-level factors. Their analyses were based on macro-level data from MOFTEC, China's Statistics Bureau, and other official sources, as well as data from the United Nations Conference on Trade and Development (UNCTAD).

Given that the growth of Chinese MNCs and their presence in the international market is a newly occurring phenomenon, most recent studies have adopted a case-study method (e.g., Child & Rodrigues, 2005; Deng, 2003, 2004, 2007; Liu & Li, 2002; Warner, et al., 2004). Deng's three studies (Deng, 2003, 2004, 2007) adopted Dunning's OLI paradigm as the framework and categorized the motivations of Chinese MNCs as market-seeking, resource-seeking, efficiency-seeking, and strategic asset-seeking. Liu and Li (2002) and Young, Huang, and McDermott (1996) focused on the internationalization processes of the Chinese MNCs. Both studies found that Chinese MNCs invested heavily in developed countries, with the primary motive of obtaining advanced technologies.

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