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Article
Publication date: 19 August 2010

Ziyi Wei

Since China initiated its “go global” policy that promotes its overseas investment, China’s Outward Foreign Direct Investment (OFDI) has increased almost twenty times…

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2010

Abstract

Since China initiated its “go global” policy that promotes its overseas investment, China’s Outward Foreign Direct Investment (OFDI) has increased almost twenty times during the last 10 years, reaching $55.9 billion in 2008. The issue of internationalization of Chinese OFDI has attracted increasing attention of researchers from a business perspective. This article systematically reviews the previous studies on overseas investments by Chinese MNEs and discusses the characteristics of Chinese internationalization behavior at both firm level and country level. The internationalization of Chinese companies cannot be understood as a simple game of “catch up” with established MNEs, and more firm‐level empirical studies should be carried out on how these characteristics influence firms’ strategic decisions.

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Multinational Business Review, vol. 18 no. 3
Type: Research Article
ISSN: 1525-383X

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Book part
Publication date: 24 November 2017

Srishti Goyal and Vasudha Chopra

The investment development path of emerging markets’ MNEs is significantly different from the developed (TRIAD) world’s MNEs; BRIC MNEs seem to have taken a different…

Abstract

Purpose

The investment development path of emerging markets’ MNEs is significantly different from the developed (TRIAD) world’s MNEs; BRIC MNEs seem to have taken a different trajectory on account of various political and economic reasons, ranging from the ‘forms of entry’ to ‘country-specific advantages’ (Tulder, R. V. (2010). Toward a renewed stages theory for BRIC multinational enterprises? A home country bargaining approach. In K. P. Sauvant, G. McAllister, & W. A. Maschek (Eds.), Foreign direct investments from emerging markets: The challenges ahead (pp. 61–74). New York, NY: Palgrave Macmillan). Yet, some believe that in the long run the internationalization strategy of the developed world MNEs and BRIC MNEs will converge. Internationalization strategies as measured by OFDI depend on various macroeconomic determinants such as income, interest rate, openness of the economy, etc. The chapter intend to highlight, the significant difference between these two groups of countries on account of diverse political reforms towards internalization of firms, yet see if these different countries might converge.

Methodology/approach

Regression analysis examines the significance of the role of home government by testing the effect of governance indicators; that is voice and accountability, on OFDI. It further, tests for convergence of internationalization strategies of the two historically divergent groups, also, it tests convergence amongst the BRIC nations. Along with forecasting, time series analysis is also employed to examine convergence using univariate sigma convergence techniques.

Findings

Impact of voice and accountability is significant but it hinders OFDI for BRIC nations, while it promotes OFDI for TRIAD & ALL. Moreover, the analysis found the existence of convergence, that is BRIC will catch up with TRIAD, but though convergence exists amongst BRIC if we take a long span of time (45 years), it is absent in short span of time (19 years), as lately BRIC have shown divergent tendency.

Research limitations/implications

Small sample size in multivariate regression analysis. Also, the governance indicator, that is voice and accountability, is perception based, and missing gaps in data for governance indicator is filled using interpolation.

Originality/value

Empirically testing the convergence of BRIC nations with the developed world. A univariate time series analysis is undertaken to understand each country’s heterogeneous FDI outflows and to address the research gap in existing forecasting literature. In addition, the comparison specifically between the Emerging Market Economies, that is the BRIC nations and the developed world gives some useful insights. This chapter ascertains the impact of governance indicator on OFDI; empirical literature shows such analysis for IFDI & FDI, but OFDI is rarely been dealt with.

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The Challenge of Bric Multinationals
Type: Book
ISBN: 978-1-78635-350-4

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Book part
Publication date: 25 October 2014

Filip De Beule, Danny Van Den Bulcke and Haiyan Zhang

To analyze the industrial development of South, East, and Southeast Asian nations in terms of investment and trade and how the institutional environment – in particular…

Abstract

Purpose

To analyze the industrial development of South, East, and Southeast Asian nations in terms of investment and trade and how the institutional environment – in particular, the government policy with regard to outward foreign direct investment (OFDI) – has played a role in this respect.

Methodology/approach

The chapter puts OFDI policy and industrial upgrading in newly industrialized, emerging, and developing Asian economies (NIEDAEs) in historical perspective to attempt to draw inference from their past behavior.

Findings

The chapter provides information about each NIEDAE’s experience with OFDI policy through a comparative analysis of OFDI promotional policy.

Practical implications

A useful source of information about each NIEDAE’s OFDI policy approach, the chapter attempts to draw recommendations for OFDI policy.

Originality/value

This chapter fulfills an information need and offers practical help to government policy makers.

Details

Multinational Enterprises, Markets and Institutional Diversity
Type: Book
ISBN: 978-1-78441-421-4

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Article
Publication date: 1 July 2020

Niti Bhasin and Kanika Kapoor

The relationship of outward foreign direct investment (OFDI) with home country's exports has significant implications for policymakers as well as business managers of…

Abstract

Purpose

The relationship of outward foreign direct investment (OFDI) with home country's exports has significant implications for policymakers as well as business managers of MNEs. Since BRICS nations have emerged as important sources as well as destinations of FDI, this paper aims to study the impact of OFDI from these countries on home country exports by using panel data for BRICS for time period 1993–2015.

Design/methodology/approach

The author use panel unit root tests, panel cointegration, VECM and causality tests in the study.

Findings

The results reveal that OFDI has a negative and significant impact on home country exports indicating that outward FDI is a substitute for exports in these countries. It also indicates long-run causality from exports towards OFDI. There is no long-run causality running from OFDI to exports, suggesting that MNEs do not “connect” with home economies' firms through forward and backward linkages in value chain.

Practical implications

From the point of view of policymakers, it implies a net outflow of capital as the outflow of foreign investment would not be matched by any incremental export earnings since exports are getting substituted by production abroad. For business managers, it is indicative of a growing foreign market that warrants large scale production and justifies the high cost and risk involved in FDI as a mode of entry compared to exports.

Originality/value

To the best of authors' knowledge, this is the first attempt to deal with the relationship between home country exports and OFDI, for an important group of emerging market economies, i.e. BRICS. The understanding of this relationship allow us to identify whether factors contributing to OFDI from emerging economies are “tied” to their home economies thereby making exports necessary or are rather based on firm specific competencies which are leveraged in different locations to cater to expanding markets.

Details

International Journal of Emerging Markets, vol. 16 no. 6
Type: Research Article
ISSN: 1746-8809

Keywords

Open Access
Article
Publication date: 19 June 2020

Qiuyu GaoYan

The purpose of this paper is to contribute to a better understanding on relations between Chinese Outward Foreign Direct Investment (OFDI) and host country political risk…

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1810

Abstract

Purpose

The purpose of this paper is to contribute to a better understanding on relations between Chinese Outward Foreign Direct Investment (OFDI) and host country political risk. To contribute to a better understanding of whether traditional wisdom on foreign direct investment (FDI) is sufficient to explain the internationalization of Chinese multinational enterprises, the author collected 15 proxy variables from the PRS Group and Heritage Foundation and applied principal component analysis (PCA) to construct a new political risk index (PRI) that measures multiple facets of political risk for 139 countries.

Design/methodology/approach

Using this new PRI as a criterion, the author investigated changes in the political risk distribution (PRD) of Chinese outward FDI (OFDI) regarding investment destinations, large projects, annual investment outflows and sectorial distributions from 2006–2017.

Findings

The author found that the vast majority of Chinese OFDI during this period is concentrated in moderate- and low-risk countries, even at the sectorial level. This paper also shows that the continuing reform of Chinese OFDI policy and strong government support have led to an unprecedented increase in Chinese OFDI, while the PRD of Chinese OFDI has maintained a gradual decline over the past decade.

Originality/value

This research provides a new measurement that covers multiple facets of political risk.

Details

International Journal of Emerging Markets, vol. 16 no. 6
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 3 April 2020

Chusheng Chen, Yun Zhan, Changjun Yi, Xue Li and Yenchun Jim Wu

This study investigates the effect of psychic distance (PD) on outward foreign direct investment (OFDI) by multinational firms originating in emerging economies and the…

Abstract

Purpose

This study investigates the effect of psychic distance (PD) on outward foreign direct investment (OFDI) by multinational firms originating in emerging economies and the moderating effect of firm heterogeneity on this relationship.

Design/methodology/approach

An empirical analysis based on a negative binomial regression model is conducted using OFDI data from 2008 to 2017 on companies listed on the Shanghai and Shenzhen Stock Exchanges in China, an emerging economy.

Findings

The results suggest a U-shaped relationship between PD and OFDI by firms in emerging economies. Both executive foreign experience and state ownership negatively moderate the U-shaped relationship between PD and OFDI.

Practical implications

Emerging economies should encourage and guide multinational firms in engaging in OFDI and emphasize the advantages and disadvantages of PD for multinational firms. Additionally, non-sate-owned firms should recruit those who have a foreign education to provide support for OFDI by firms in emerging economies. Multinational firms should determine investment locations by consulting with executives with foreign experience to improve their ability to engage in OFDI.

Originality/value

This study combines macro and micro perspectives and integrates PD and firm heterogeneity into the same model with a sample of multinational firms originating in China. The findings support the existence of a PD paradox, which helps to enriching the theory on foreign direct investment.

Details

Management Decision, vol. 58 no. 7
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 30 July 2010

Daying Yan, Junjie Hong and Bing Ren

The paper aims to investigate the determinants of outward foreign direct investment (OFDI) by Chinese enterprises during China's institutional and economic transition…

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1520

Abstract

Purpose

The paper aims to investigate the determinants of outward foreign direct investment (OFDI) by Chinese enterprises during China's institutional and economic transition, specifically from the institutional perspective.

Design/methodology/approach

An analytical framework was conceptualized by introducing several institutional‐based advantages peculiar to Chinese firms and a series of hypotheses developed regarding the influences of these advantages on the OFDI strategies of Chinese enterprises.

Findings

The findings confirm the specific institutional‐based advantages in terms of home government support, investor's financing capacity and host ethnic Chinese resources have salient impacts on OFDI behavior of Chinese firms, as predicted by initial hypotheses. Evidence from sub‐samples tests indicates there are varied determinant mechanisms for trade‐oriented, produce‐oriented, and other types of OFDI, respectively.

Originality/value

The paper offers two primary contributions. On one hand, by integrating conventional eclectic theory and Chinese institutional context, a series of novel hypotheses is proposed that highlights some specific institutional advantages Chinese outward investors could exploit. In this way, the paper provides an analytical framework useful for better understanding of internationalization of enterprises from other emerging and transitional economies.

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Nankai Business Review International, vol. 1 no. 3
Type: Research Article
ISSN: 2040-8749

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Article
Publication date: 6 July 2010

Rajah Rasiah, Peter Gammeltoft and Yang Jiang

The purpose of this paper is to examine the drivers of outward foreign direct investment (OFDI) from the emerging economies and if there exists a positive role for home…

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8912

Abstract

Purpose

The purpose of this paper is to examine the drivers of outward foreign direct investment (OFDI) from the emerging economies and if there exists a positive role for home governments to coordinate them. The backdrop is the recent increases in OFDI from emerging economies and the emergence of several emerging economy firms, which have caught up to become global leaders in several industries. The paper focuses particularly on experiences from Asian economies.

Design/methodology/approach

The paper applies a multi method approach and relies on literature studies, investment statistics, government reports, press reports, company reports, and interviews with public officials.

Findings

Extending the motive‐based business theory, the paper first establishes the pronouncement of a third wave of OFDI from the mid‐1990s. Whereas the typical motives have remained important, the technology‐seeking motive has become significantly more important during the third wave. Typical policy prescriptions to liberalize government regulations have been called into question. Many home emerging country governments have acted to coordinate their activities by regulating proactively investment outflows. The evidence also shows that the successful investment outflows have benefited significantly from home governments addressing the characteristics and motives of target industries and locations abroad.

Practical implications

The analysis shows that contrary to mainstream prescriptions many home governments have successfully regulated strongly OFDI from the emerging economies. However, it is important for home governments to consider the broader interest of promoting capital flows to ensure the long‐term development of economies rather than narrow national interests. Home and host governments should seek to establish common and specific collaboration platforms to raise information flows and coordinate better the negotiations and execution of investment projects.

Originality/value

The paper provides a more thorough analysis of the implications for home country policies of the increasing outward investment flows from emerging economies and the increasing competitiveness and capabilities of their transnational firms. It proposes augmentations to prior frameworks of drivers and motives of OFDI and pushes deeper the home policy implications of increasing outward investment flows.

Details

International Journal of Emerging Markets, vol. 5 no. 3/4
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 25 January 2011

Rakhi Verma and Louis Brennan

The purpose of this paper is to focus, at the country‐specific level, on India's recent outward foreign direct investment (OFDI) surge, and more broadly test the investment

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3733

Abstract

Purpose

The purpose of this paper is to focus, at the country‐specific level, on India's recent outward foreign direct investment (OFDI) surge, and more broadly test the investment development path (IDP) hypothesis for India.

Design/methodology/approach

A combination of descriptive and empirical analysis has been used to ascertain the relevance of the IDP theory for India. The theoretical background of this paper is the IDP hypothesis, which states that the net outward investment position (NOIP) of a country depends on its level of development. The hypothesis is tested with a time series data set from 1991 to 2006.

Findings

This paper highlights that while India's sharp rise in investments since 1991 has followed the gross domestic product driven development, its NOIP fails to exactly match the stylized IDP model.

Research limitations/implications

This paper undertakes a macro level analysis and has not tested the hypothesis at the sectoral or bilateral levels.

Practical implications

The paper identifies some peculiar features of Indian OFDI that cannot be explained by the IDP model per se. Hence modifications are required for a fuller understanding of India's investment position.

Originality/value

This paper addresses an under researched topic of Indian OFDI.

Details

International Journal of Emerging Markets, vol. 6 no. 1
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 2 June 2020

Kai Sun, Hung-Gay Fung, Yuping Zeng and Penghua Qiao

This paper aims to examine the effect of chief executive officers (CEOs’) global experience (GE) on the Chinese firms’ outward foreign direct investment (OFDI) and…

Abstract

Purpose

This paper aims to examine the effect of chief executive officers (CEOs’) global experience (GE) on the Chinese firms’ outward foreign direct investment (OFDI) and provides new insights on how CEOs’ foreign study and education experiences may affect firms’ OFDI. Further, this paper examines whether CEO power and state ownership have a positive moderating effect on the relationship between CEOs’ GE and firms’ OFDI.

Design/methodology/approach

This study used panel data of Chinese manufacturing companies in 2007-2016 to examine different hypotheses. The authors tested them using a zero-inflated negative binomial regression model to shed light on the effect of CEOs’ GE on the firms’ OFDI.

Findings

This study found that CEOs’ GE generally promotes Chinese firms’ OFDI. CEOs’ foreign study experience has a stronger effect than foreign education experience. Further, CEO power and state ownership have a positive moderating effect on the relationship between CEOs’ GE and firms’ OFDI.

Research limitations/implications

The findings have two important implications for managers and policy-makers. First, globally experienced CEOs are vital for firms to succeed in today’s highly competitive global environment. Second, CEO power is important in firms’ OFDI decision-making.

Originality/value

The authors use path dependency and upper echelons theories to show that GE, particularly foreign study experience, enables CEOs to take advantage of available resources in the market and institutional environment to create a path for the firm to expand globally.

Details

Chinese Management Studies, vol. 15 no. 1
Type: Research Article
ISSN: 1750-614X

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