Search results

The purpose of this paper is to explore the extent to which the firm-specific advantages (FSAs) which underlie international expansion have proved resilient for European multinational enterprises (MNEs) operating in a key emerging market – China.

The authors adopt a qualitative, case study approach, using interview data to explore the companies’ FSAs on market entry, how they evolved over time and the strategies adopted to defend them. They undertook 15 in-depth interviews with decision makers in six companies addressing their experience since market entry. To control for sector-level effects, the authors focus on companies in the environmental protection sector.

The authors found examples of significant erosion of the FSAs among the case study companies, which undermined their position on the host market and their long-term competitiveness. The key sources of erosion were limitations in market access, exclusion from local networks and the emergence and upgrading of local competitors, often firms with whom the MNEs had collaborated in the past.

The relatively small number of cases (six) limits the generalisability of the findings by the authors. However, the authors are convinced that, given that the case companies are generally large and have long experience in China, the conclusions made are well grounded. In addition, there was the high level of coherence in the reported experiences of the interviewees, providing further support for the findings.

The experience of these case study companies highlights that MNEs have difficulty retaining their unique FSAs when faced with rapidly evolving local competition in a key emerging market. Key strategies mobilised included focussing on a sub-sector of the market and localising both the company and their supply chains. The difficulties experiencing by these case study companies in retaining their FSAs underline the need for MNEs in emerging markets to avoid complacency and constantly innovate, but they also raise questions about their capacity to extend their international reach in the long term.

Very few studies have explored the FSAs of firms and how they evolve over time using a case study-based qualitative approach, especially in emerging markets.

The objective of this chapter is to explore the experience of EU companies in the environmental protection sector in China focusing on their difficulties and the mitigating strategies mobilized.

We adopt a qualitative, case study approach, using interview data to explore the liability of foreignness (LOF) experienced by the companies studied and the strategies adopted to overcome LOF.

We found examples of all categories of LOF identified by Eden and Miller (2004), among our case study companies, but the most problematic and persistent were discrimination hazards. Companies adopted various strategies to cope with LOF, including maximizing the use of local employees, developing relationships with local and national government actors, and establishing partnerships with local companies. None had chosen a combative legalistic approach to the unfair treatment they had suffered.

The relatively small number of cases (six) limits the generalizability of our findings. However, we are convinced that the size of our case companies and their long experience in China mean our findings are well grounded, although more research is needed.

The experience of our case study companies can help to inform the strategy of companies interested in entering and developing the Chinese market.

Very few studies have explored LOF through a case study-based qualitative approach. This research therefore helps to supplement findings from more large-scale quantitative analyses. In addition, there is little research on the LOF of foreign companies in China. Given the growing importance of the market, we believe the question merits further analysis.

The purpose of this paper is to analyze the role of institutional distance and host country attractiveness in location determinants of Chinese Foreign investments in EU in the renewable energy sector, taking into account bilateral political and economic relations.

A firm-level Ministry of Commerce (MofCom) database of greenfield and non-greenfield Chinese investments abroad is used. A six fixed-effects logit analysis is performed.

Chinese firms tend to invest in EU countries with reduced rule of law; market affluence is an attraction factor for them, but they do not seem to be human capital asset-seekers. Countries with politically stable environment are most attractive to sales/services subsidiaries; while countries with good control of corruption, low trade barriers and encouraging foreign ownership are most attractive to manufacturing subsidiaries. A large market is the most attractive factor for R & D subsidiaries, and a rich market is the most attractive factor for manufacturing subsidiaries. Manufacturing subsidiaries are more technological asset-seekers. R & D subsidiaries are the most non-human capital asset-seekers.

The study extends the state of the art of the literature by developing a theoretical framework, grounded on the influence of host country institutional factors and on endowment of resources on the location choice of Chinese investors. Further variables should be included in the future (industrial specialization of host country, cultural distance, bilateral ties).

Policy implications are relevant. They are related both to outward foreign direct investment attraction policies and to Europe-China cooperation dialogue. With reference to attraction policies, as Chinese green firms are technological asset-seekers, more than human capital asset-seekers, EU countries interested in partnering with Chinese investors should develop specific measures targeting encouraging technology spillover. Even R & D subsidiaries should be tempted with technology-oriented measures. With reference to Europe-China cooperation, the paper findings support suggestions for a more active European position on foreign investments in key European energy sectors.

The paper is grounded on an improved theoretical model, tested through a unique Mofcom firm-level database. Originality lies in the fact that the authors provide a sectoral insight. The need for sectoral analysis is fundamental as Chinese industrial development and internationalization path vary extensively across industry, due to policy interventions, supportive measures and prioritized initiatives. Zhang et al. (2011, p. 229) found that – specifically – the energy sector is highly sensitive to host country institutional context, therefore Chinese foreign direct investment are more likely to be exposed to regulatory and competitive pressure compared to other industries.