Local sourcing of multinational enterprises in China (original) (raw)
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Do Foreign Firms in China Incur a Liability of Foreignness? The Local Chinese Firms’ Perspective
Thunderbird International Business Review, 2014
Liability of foreignness (LOF) has been one of the building blocks of multinational enterprise theory development, but we have limited knowledge about the liability of foreignness in the context of multinationals operating in developing countries. This study suggests that in a developing country like China, foreignness may still exist, but its negative impact on foreign fi rms' performance may have become insignifi cant. Local Chinese fi rms were found to enjoy signifi cant location-based advantages over their foreign counterparts, contributing to liability of foreignness. However, the adverse effects of liability of foreignness on foreign fi rms appear to be offset by the foreign fi rms' superior fi rm-specifi c and multinationality advantages over local Chinese fi rms. Further, the location-based advantages that foreign fi rms have built up over time further serve to strengthen their overall competitive position in China.
China's private-sector multinational enterprises (MNEs) are often owned and controlled via offshore holding companies in tax havens. As such, their foreign affiliates are often difficult to identify, and their activities are also not captured in official Chinese outward foreign direct investment data. To date, therefore, there has been comparatively little systematic analysis of these affiliates as they internationalize. Here we address this gap by developing a method that allows us to identify 104 privately owned Chinese MNEs owned via offshore holding companies, as well as their 227 foreign affiliates. We analyze and discuss the motivations for the formation of their foreign affiliates in light of current theory.
Multinational Business Review
Purpose International business theory suggests that multinational enterprises (MNEs) seek to internalise resources embedded in local firms to complement their own through inter-organisational relationships, yet little is known about whether and how these business linkages differ between foreign (F)MNEs and domestic (D)MNEs. This paper aims to explore the linkage differential between DMNEs and FMNEs operating in the same single-country contexts and to examine whether foreignness, regional origin and technological capability make a difference. Design/methodology/approach This study is based on a unique firm-level data set of 292 MNEs located in five advanced, small open economies (SMOPECs). This study analyses the benefit received – in the form of technical and organisational resources and knowledge – by DMNEs and FMNEs via backward, forward and collaborative linkages with local business partners. Findings Our research finds FMNEs benefit less from linkages than DMNEs; and FMNEs origi...
Chinese Multinationals and Entry Mode Choice
Foreign direct investment (FDI) ownership decision is one of the most researched topics in the international business literature. However, little is known about the extent to which this knowledge can be applied to emerging-economy multinationals. Building on the institutional, transaction cost and resource-based view perspectives, this paper analyzes the determining factors of FDI mode choice between wholly-owned subsidiary (WOS) and joint venture (JV) by Chinese firms. From a sample of 139 outward FDI decisions made by large Chinese firms between 2002 and 2009, our results show certain characteristics that differ from the conventional wisdom of the multinational enterprise (MNE). Host country political risk and cultural distance do not affect FDI ownership decisions of Chinese MNEs, while firm size is negatively related with WOS. However, from a more conventional point of view, technological intensity of the industry is positively associated with WOS.