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Article
Publication date: 2 September 2013

Yang Yang, Xiaohua Yang and Barry W. Doyle

There has been a surge of overseas investment from China, both to developing and developed countries. However, there is limited understanding of the impact the…

Abstract

Purpose

There has been a surge of overseas investment from China, both to developing and developed countries. However, there is limited understanding of the impact the internationalization of these firms has on their value creation. This paper seeks to draw on the reconciled FSA/CSA framework with Dunning's four motives to differentiate two types of FDI: traditional FDI and strategic asset-seeking FDI. Further, the paper draws on Verbeke's FSA/CSA recombination process model to analyze the differentiated value creation of traditional FDI and strategic asset-seeking FDI for the Chinese MNEs.

Design/methodology/approach

The paper adopts event study methodology to measure the value created by Chinese MNE's FDI projects and hierarchical linear regression to test the hypotheses. The sample consists of 121 FDI projects publicly announced by Chinese listed companies during 2001-2009.

Findings

Both traditional and strategic asset-seeking FDI create value and traditional FDI creates more value than strategic asset-seeking FDI for Chinese MNEs. In addition, the paper empirically demonstrates that traditional FDI into developing countries creates more firm value than traditional FDI into developed countries or strategic asset-seeking FDI into developed countries.

Originality/value

This research makes the following original contributions: it contributes to the growing body of literature on internationalization of Chinese firms by investigating whether international expansion creates firm value and how the alignment between types of FDI and location strategies influences firm value creation; the study contributes to the literature by providing insights into the performance implications of emerging economy enterprises (EEEs); and the research contributes to FDI theory building by incorporating learning concepts in internationalization theories and by extending the context of internationalization theories to that of EEEs.

Details

Multinational Business Review, vol. 21 no. 3
Type: Research Article
ISSN: 1525-383X

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Article
Publication date: 20 April 2015

Klaus E. Meyer

The purpose of this paper is to shed more light on the concept of “strategic asset-seeking FDI”, which is frequently used in discussion of emerging economy multinational…

Abstract

Purpose

The purpose of this paper is to shed more light on the concept of “strategic asset-seeking FDI”, which is frequently used in discussion of emerging economy multinational enterprises (MNEs), but it is challenged by some scholars. The author argues that he needs this category because an important type of foreign direct investment (FDI) is not captured by the other motives identified by John Dunning, namely, market-, efficiency- and natural-resource-seeking FDI.

Design/methodology/approach

The author illustrates the phenomenon of strategic asset-seeking FDI with case examples that form the starting point for his theoretical arguments.

Findings

Some FDI is undertaken explicitly with the aim to use assets acquired abroad to enhance the operations of the investor in other markets, including, notably, the investors’ home market. This contribution to capability-building processes of the MNE, indeed, constitutes an important and distinct type of investment motive.

Originality/value

The author concluded that Dunning’s typology remains a powerful tool to analyze contemporary business strategies, but it suggests refining the definition of the categories.

Details

The Multinational Business Review, vol. 23 no. 1
Type: Research Article
ISSN: 1525-383X

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Article
Publication date: 20 March 2019

Qiuling Gao, Zijie Li and Xinli Huang

Based on the strategy tripod perspective, this study aims to address how emerging economy multinational enterprises (EMNEs) make a strategic decision of choosing a foreign…

Abstract

Purpose

Based on the strategy tripod perspective, this study aims to address how emerging economy multinational enterprises (EMNEs) make a strategic decision of choosing a foreign location for their strategic asset seeking and under what mechanism EMNEs make foreign direct investment (FDI) location choice.

Design/methodology/approach

This paper first reviews the literature on strategy tripod and strategic asset seeking strategy of EMNEs. Then, six cases of Chinese multinational enterprises operating in manufacturing industry have been introduced, emphasizing on interactions within three dimensions of strategy tripod framework, namely, resource-based dimension, industry-based dimension and institution-based dimension. By triangulating with multiple sources of archival and interview data, this paper identified a conceptual model presenting location choice mechanisms.

Findings

Based on a comparative multi-case study, four mechanisms of EMNEs’ location choice when seek strategic asset by FDI within a strategy tripod framework have been revealed. Specifically, EMNEs make their strategic decision of choosing a foreign location for their strategic asset seeking under mechanisms of seeking complementary resources based on industry characteristics; echoing with institutional dimension of home country when exploitation of resource; matching institutional dimension of host country when consider industry fitness; and institutional leveraging combined with understanding of resource and industry dimensions inside strategy tripod.

Originality/value

The findings shed novel insights into the mechanisms under which EMNEs choose their location for strategic asset-seeking FDI. It also broadens the strategy tripod framework by looking deeper into the characteristics of each dimension within a new research context of EMNEs’ FDI location choice.

Details

Chinese Management Studies, vol. 13 no. 3
Type: Research Article
ISSN: 1750-614X

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Article
Publication date: 3 April 2009

Dylan Sutherland

This paper aims to explore the contribution of China's largest business groups to China's outward foreign direct investment (OFDI), looking particularly at the question of…

Abstract

Purpose

This paper aims to explore the contribution of China's largest business groups to China's outward foreign direct investment (OFDI), looking particularly at the question of whether they contribute to strategicasset‐seeking OFDI.

Design/methodology/approach

It uses national‐level data and business group OFDI data to explore the sectors from which OFDI originates and destinations to which it is sent. From this conclusions are drawn as to the types of investments being made.

Findings

In the national context strategicasset‐seeking OFDI from China has been rather limited to date. Instead, OFDI expansion still appears more closely linked to China's expansion as a trading nation with a natural resource deficit. Strategicasset‐seeking OFDI when it does take place, moreover, is orchestrated to a large extent through large state controlled business groups, as is much other OFDI.

Research limitations/implications

A limitation of this research is the reliance on official data and the assumed simplification that most strategicasset‐seeking OFDI is concentrated in the manufacturing industries.

Practical implications

More attention should be paid to the role of these select business groups as they play a significant part in China's OFDI.

Originality/value

There is a growing presumption that much of China's OFDI is strategicasset‐seeking in nature and that new theories are required to explain this trend. Many firm‐level studies, however, rely upon just a few high‐profile but unrepresentative cases. This paper redresses this imbalance. It also shows that China's largest trial business groups have played an important role in her OFDI to date.

Details

Chinese Management Studies, vol. 3 no. 1
Type: Research Article
ISSN: 1750-614X

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Book part
Publication date: 24 June 2015

Sathyajit R. Gubbi and Sinan A. Sular

Outward foreign direct investments (FDI) by Turkish firms in the new millennium show intriguing geographic distribution pattern and unlike the predictions of classical…

Abstract

Outward foreign direct investments (FDI) by Turkish firms in the new millennium show intriguing geographic distribution pattern and unlike the predictions of classical theories of FDI. In this study we contribute by linking the observed pattern of outward FDI with Turkish firms’ motivation for investment across national borders. We enrich research by collecting and analyzing FDI motivation data at the firm-level for a very important but less researched developing country: Turkey. Content analysis of text material on the foreign investments made by 211 Turkish firms reveals that Turkish firms primarily perform FDI in European developed countries for reasons other than conventional, namely, market- and strategic-asset-seeking motivations. More importantly, Turkish firms seem to be using the European countries to (1) present themselves as a European Union company, (2) make use of special features of these countries to expand their businesses within and to other countries and, (3) make use of the favorable tax treatment policies available to foreign investors. Surprisingly, our analysis shows that in spite of its small size, the Netherlands is a preferred destination for Turkish FDI over other Western European countries due to its strategic location and favorable investment policies.

Details

Emerging Economies and Multinational Enterprises
Type: Book
ISBN: 978-1-78441-740-6

Keywords

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Article
Publication date: 9 April 2019

Lili Mi, Yuanfei Kang and Yulong Liu

This paper aims to investigate the relationship between strategic asset-seeking intent and firms’ entry strategies of foreign investment in the context of emerging market firms.

Abstract

Purpose

This paper aims to investigate the relationship between strategic asset-seeking intent and firms’ entry strategies of foreign investment in the context of emerging market firms.

Design/methodology/approach

This study is based on survey data of 392 Chinese foreign direct investment projects. Structural equation modelling is used for data analysis.

Findings

With stronger strategic asset-seeking intent, emerging market multinational enterprises are likely to locate their subsidiaries in developed countries, use a wholly owned subsidiary mode and invest with greater intensity, while they do not have a clear preference in entry timing.

Practical implications

The strategic asset-seeking intent applies not only to emerging market firms but also to small and medium firms in general that have limited resources and a need to catch up with stronger competitors. This study therefore provides guidance to these firms.

Originality/value

This study contributes by investigating how the strategic asset-seeking intent affects firms’ strategies. The findings have practical implications for strategic managerial decisions that lead to sustained competitive advantage and improved firm performance.

Details

Journal of Business Strategy, vol. 41 no. 1
Type: Research Article
ISSN: 0275-6668

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Article
Publication date: 12 April 2013

Jason Li‐Ying, Tamara Stucchi, Anne Visholm and Joanna Solvig Jansen

The purpose of this paper is to explain in detail the strategic asset‐seeking OFDIs of Chinese firms in Denmark through a theoretical lens that combines the updated OLI…

Abstract

Purpose

The purpose of this paper is to explain in detail the strategic asset‐seeking OFDIs of Chinese firms in Denmark through a theoretical lens that combines the updated OLI (Ownership, Location, Internalization) paradigm and the internalization theory. Meanwhile, the authors hope to unveil the unique characteristics of firm specific advantages (FSAs, including O and I advantages) and country specific advantages (CSAs, including L advantages).

Design/methodology/approach

The authors chose two case firms that just started investing and a third one that was in the process of preparing investment in Denmark. Primary data were collected by semi‐structured interviews in English at various locations in late 2009 and early 2010. The three Chinese firms in this study share a common primary objective in their strategic orientation of OFDIs. That is to seek strategic assets that are complementary and critical to augment their existing FSAs.

Findings

Rugman stated that strategic asset‐seeking OFDIs are supposed to have high levels of FSAs and CSAs. This study presents a more detailed analysis regarding the O, L and I advantages that Chinese investing firms in Denmark are perceived to possess. It was found that these Chinese investing firms had high levels of Oa and Oi but Ot was largely absent; furthermore, although Lr was obviously appreciated in Denmark, Li presented a mixed picture. The paper also found that internalization advantages were only able to be realized when investing firms were good at utilizing networking and guanxi, which were largely derived from their prior Oi advantages.

Originality/value

Few have analyzed strategic asset‐seeking OFDIs made by emerging markets based on the FSA/CSA matrix that combines the OLI paradigm and the internalization theory. This study pursued this research endeavor by enriching a refined framework that connects the OLI paradigm, which recognizes multiple dimensions of O advantages and an institutional perspective, to the internalization theory, which converts O and I advantages into FSAs and associates L advantages with CSAs.

Details

Multinational Business Review, vol. 21 no. 1
Type: Research Article
ISSN: 1525-383X

Keywords

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Book part
Publication date: 25 October 2014

Bent Petersen and Rene E. Seifert

The chapter provides an economic explanation and perspectivation of strategic asset seeking of multinational enterprises from emerging economies (EMNEs) as a prominent…

Abstract

Purpose

The chapter provides an economic explanation and perspectivation of strategic asset seeking of multinational enterprises from emerging economies (EMNEs) as a prominent feature of today’s global economy.

Approach

The authors apply and extend the “springboard perspective.” This perspective submits that EMNEs acquire strategic assets in developed markets primarily for use in their home markets.

Findings

The authors succumb that the springboard perspective is alluring theoretically as well as empirically as it suggests that when EMNEs acquire strategic assets, they experience liabilities of foreignness (LOF) that are low relative to those of MNEs from developed markets. The authors concede to this LOF asymmetry but also point out that liabilities of outsidership (LOO) can offset or weaken the home-market advantage of some EMNEs when competing with MNEs.

Research implications

LOO appears as the more relevant concept to use when explaining strategic asset seeking of EMNEs. A set of propositions are formulated to guide empirical testing.

Originality/value

The insights gained from using the springboard perspective and the LOO concept are non-trivial: They basically predict future dominance of ‘insider’ EMNEs at the expense of MNEs from developed markets.

Details

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

Keywords

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Article
Publication date: 7 June 2021

Fabian Hänle, Stefanie Weil and Bart Cambré

This paper aims to use the institutional perspective to jointly explore the underlying motives that drive Chinese private small- and medium-sized enterprises (SMEs) to…

Abstract

Purpose

This paper aims to use the institutional perspective to jointly explore the underlying motives that drive Chinese private small- and medium-sized enterprises (SMEs) to invest in the developed economy of Germany and the role China’s institutional environment is playing in this context.

Design/methodology/approach

Given the lack of recent in-depth studies, the authors use multiple case study method to present rich insights from elite interviews with executives belonging to seven Chinese SMEs and industry experts, as well as the study of firm documents, social media and the latest governmental policies.

Findings

The results indicate not only market-, resource- and strategic asset-seeking motives, but contrary to the literature, also efficiency-seeking goals. Further driving factors are the integration in global value chains and high degrees of entrepreneurial orientation. The second major finding is that China’s institutional environment induces widely divergent effects. Its ministries established new outward foreign direct investments (OFDI) support measures that are beneficial for some SMEs’ post-entry operations. However, some firms are not aware of any support measures or suffer from discrimination that hinders innovation and from which they try to escape by investing abroad.

Originality/value

This paper considers different levels of analysis (firm, entrepreneur, institutional environment) to investigate Chinese SMEs’ motives in Europe’s largest market. By examining why and how these firms use OFDI to a developed economy, the authors address an essential question for China’s economy that is of primary political and academic concern (“How can China get that improved innovation that often seeds entrepreneurial growth?”). In addition, the study contributes to the growing discussion of institutional escapism in emerging markets by revealing five institutional hardships Chinese SMEs are facing and how this relates to their internationalization.

Details

Multinational Business Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1525-383X

Keywords

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Article
Publication date: 1 June 2010

Mehmet Demirbag, Ekrem Tatoglu and Keith W. Glaister

Drawing on institutional and transaction cost theories, the purpose of this paper is to examine the location choice for a sample of 522 foreign affiliates of Turkish…

Abstract

Purpose

Drawing on institutional and transaction cost theories, the purpose of this paper is to examine the location choice for a sample of 522 foreign affiliates of Turkish multinational enterprises (MNEs).

Design/methodology/approach

Binary logistic regressions are conducted to test a number of hypotheses on the functional relationships between the hypothesized effect of variables and location choice of Turkish MNEs based on a secondary data drawn from official sources.

Findings

In general, the findings provide support for the majority of the study's hypotheses and tend to confirm the theoretical perspectives adopted. The level of political constraints, the level of knowledge infrastructure in the host country market, subsidiary density, industry R&D intensity and subsidiary size are found to have the expected impact on the Turkish MNE's location choice among geographic alternatives. No support is found for the impact of ownership mode of subsidiary and the group affiliation on Turkish MNEs' location choice for their subsidiaries.

Research limitations/implications

The paper focuses on Turkish MNEs and the findings may not be generalizable to other emerging country (EC) MNEs. Also, the classification of geographic location into developed versus emerging countries may be too crude.

Practical implications

In general, the paper posits that Turkish MNEs have a motive of strategic asset seeking to enhance their global competitiveness when they enter developed countries, whereas they simply attempt to exploit their firm‐specific advantages or competencies when they access emerging countries.

Originality/value

Given the increasing number of EC MNEs entering other emerging and developed markets, this paper adds to the understanding of the determinants of location strategies of Turkish MNEs by identifying key regional characteristics that lead Turkish MNEs to select particular locations, among the several geographic alternatives.

Details

International Marketing Review, vol. 27 no. 3
Type: Research Article
ISSN: 0265-1335

Keywords

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