John Anderson, Dylan Sutherland, Fan Zhang and Yangyang Zan
Many academic studies in international business empirically test the determinants of Chinese outward (O)FDI. A weakness with these studies is the limited critical evaluation given…
Abstract
Purpose
Many academic studies in international business empirically test the determinants of Chinese outward (O)FDI. A weakness with these studies is the limited critical evaluation given to the way in which Chinese OFDI data is collected and used. Chinese multinational enterprises (C)MNEs frequently establish special purpose entities in tax havens to transit FDI via intermediary jurisdictions. The purpose of this paper is to develop an alternative approach for measuring CMNE OFDI and subsequently explore how the results of previous studies may have been confounded use of tax havens by MNEs. The authors address the latter question by replicating widely cited quantitative studies.
Design/methodology/approach
Replication approach.
Findings
Through the replication of several studies, this paper finds high levels of discrepancies in general sign and significance between global ultimate ownership modeling results and those using officially recorded FDI data. More specifically, the main areas impacted by using official data rather than data which accounts for the use of tax havens are cultural proximity, geographic distance and natural resource seeking.
Practical implications
This paper looks at studies, which use official FDI data to understand CMNE behavior. It is important to note, however, that there are many hundreds, if not thousands, of studies that use other national-level FDI data to draw similar types of inferences about MNE activity. In this sense, the authors’ critical evaluation of CMNE work holds a much broader and, arguably, more important question: How reliable, in general, are studies, which use officially recorded FDI data? The results from this paper have already caused reflection on the impact of tax haven use on official FDI collection organizations, such as the OECD.
Social implications
The social implications of companies using tax havens to route FDI is immense. The use of tax havens not only aids in tax minimization for companies, but also obscures the true providence and identity of companies. This is problematic in a society, which increasingly desires to understand where, how and by whom a product or service was created prior to consumption.
Originality/value
This paper argues that the tendency for Chinese MNEs to establish offshore holding companies in tax havens has given rise to significant biases in official FDI statistics. Through the use of global ultimate ownership data, the authors have put forward an alternate approach to measure genuine CMNEs’ OFDI activity, one which confronts and deals with their pervasive engagement with tax havens. Through the replication of several Chinese OFDI location choice studies, it was possible to understand how methodological issues stemming from the use of official FDI data may influence prior econometric results. In doing so, the authors hope to have sparked a debate which may lead to a re-evaluation of earlier received wisdom regarding Chinese MNE investment strategy and behaviors. This in turn should foster improved theorizing regarding the Chinese MNE and its outward investment activities.
Details
Keywords
Ludan Wu, Dylan Sutherland, Xinghao Peng and John Anderson
Cities are host to many of the world’s knowledge intensive research and innovation clusters. As such, they are likely to be attractive locations for emerging market multinational…
Abstract
Purpose
Cities are host to many of the world’s knowledge intensive research and innovation clusters. As such, they are likely to be attractive locations for emerging market multinational enterprises (MNEs) seeking to engage in knowledge seeking “springboard” type firm-level catch-up strategies. The purpose of this study is to therefore explore whether city-based research-intensive clusters containing deep pools of location bounded (i.e. “sticky”) knowledge are a stronger driver for greenfield research and development (R&D)-related FDI projects for Chinese MNEs than they are for developed market MNEs.
Design/methodology/approach
The authors use logistic modelling on 97,163 worldwide greenfield FDI projects to explore the relative likelihoods of Chinese MNEs engaging in R&D-related greenfield (i.e. “strategic asset seeking”) FDI projects as well as how city type (global or research-intensive cluster city) moderates this relationship for Chinese MNEs.
Findings
The authors find that Chinese MNEs are more likely to engage in overseas R&D FDI projects (compared with other types of project) than DMNEs and that research-intensive city clusters hold a stronger attraction for Chinese MNEs than developed market MNEs.
Research limitations/implications
The authors discuss how the research contributes to the debate on emerging market MNE catch-up theory, as well as that on sub-national city location choice, by highlighting the growing importance of sub-national geography to understanding strategic asset seeking related greenfield FDI.
Practical implications
Sub-national city location choice is an important driver of strategic asset seeking FDI for Chinese MNEs, one that both national and local city level policymakers should pay attention to.
Social implications
Chinese FDI via aggressive mergers and acquisitions to acquire key technologies has been restricted in recent years. Policymakers must consider whether they may also wish to restrict Chinese greenfield FDI in R&D-related projects, which now exhibit a pronounced upward trend.
Originality/value
The authors highlight the growing importance of sub-national geography to understanding strategic asset seeking related greenfield FDI in Chinese MNEs (and how it plays, more generally, a central role in their strategies).
Details
Keywords
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…
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 strategic‐asset‐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 strategic‐asset‐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. Strategic‐asset‐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 strategic‐asset‐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 strategic‐asset‐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
Keywords
Ilan Alon, Julian Chang, Marc Fetscherin, Christoph Lattemann and John R. McIntyre
Hao Liang, Luc Renneboog and Sunny Li Sun
We take a state-stewardship view on corporate governance and executive compensation in economies with strong political involvement, where state-appointed managers act as…
Abstract
Purpose
We take a state-stewardship view on corporate governance and executive compensation in economies with strong political involvement, where state-appointed managers act as responsible “stewards” rather than “agents” of the state.
Methodology/approach
We test this view on China and find that Chinese managers are remunerated not for maximizing equity value but for increasing the value of state-owned assets.
Findings
Managerial compensation depends on political connections and prestige, and on the firms’ contribution to political goals. These effects were attenuated since the market-oriented governance reform.
Research limitations/implications
Economic reform without reforming the human resources policies at the executive level enables the autocratic state to exert political power on corporate decision making, so as to ensure that firms’ business activities fulfill the state’s political objectives.
Practical implications
As a powerful social elite, the state-steward managers in China have the same interests as the state (the government), namely extracting rents that should adhere to the nation (which stands for the society at large or the collective private citizens).
Social implications
As China has been a communist country with a single ruling party for decades, the ideas of socialism still have a strong impact on how companies are run. The legitimacy of the elite’s privileged rights over private sectors is central to our question.
Originality/value
Chinese executive compensation stimulates not only the maximization of shareholder value but also the preservation of the state’s interests.
Details
Keywords
The Northeast of the People's Republic of China is now termed the “rustbelt” of the country: there is a need to reform and restructure enterprises in the region. China's major…
Abstract
Purpose
The Northeast of the People's Republic of China is now termed the “rustbelt” of the country: there is a need to reform and restructure enterprises in the region. China's major industrialization is underway elsewhere, with factories located in coastal area and primarily oriented towards exports into global markets. In the meantime the original primary industrial base in Northeast has been almost been forgotten.
Design/methodology/approach
This preliminary mapping and tentative analysis of the Chinese rustbelt is based on intensive field interviews in three major cities in Northeast China – Dalian, Changchun and 1Harbin. The empirical results are complemented with official statistics and other government information. This research paper is a first attempt to take stock of the remaining technological and industrial structures that exist in the area and how they can become revitalized to service the overall economy.
Findings
This paper provides a preliminary examination of the possibility of using the region's strong higher education base to develop new high technology industries. It argues that this is a possible option for the future.
Originality/value
The information and analysis provides insights into a region of China not well‐known to the rest of the world, which has many challenges, but also many opportunities.
Details
Keywords
This paper aims to analyze the impact of the degree of local government decision-making competition on the optimal investment amount, investment location and investment failure of…
Abstract
Purpose
This paper aims to analyze the impact of the degree of local government decision-making competition on the optimal investment amount, investment location and investment failure of innovative investment enterprise under multiple risk appetite type of innovative investment enterprise. This paper also points out three regulation paths that central government could use to avoid the influence of local government decision-making competition on the validity of enterprise innovation investment (EII).
Design/methodology/approach
Based on analysis frame of government competition about unitary government states, this paper builds duopoly decision model to analyze influence of local government decision-making competition on EII. Considering information asymmetry and multiple risk appetite type of decision-maker, this paper analyzes influence of local government decision-making competition on location selection, the optimal investment amount, identification of investment failure and exit mechanism of EII according to different relationship between reference points of local government decision-making competition and EII.
Finding
The optimal investment amount of EII has positive correlation with risk appetite type of decision-maker, local government decision-making competition. Identification of investment failure and exit are divided into three phases. The boundary conditions are directly related to risk appetite type and amount of local government subsidy. Regional factor endowment and degree of preferential policy are main factors attracting enterprise investment. Local governments should analyze the interests of EII. There are three paths to avoid vicious competition among local governments: unified planning, revising of audit index, increasing penalties for failure of policies.
Originality/value
With rapid development of China's new urbanization process, urban economy has become an important carrier of economic development. Attracting foreign direct investment is an important measure to promote urban economic growth, and EII is the most important one. However new urbanization would lead to local government decision-making competition and then influence EII. Through analyzing influence of local government decision-making competition on EII, theory guidance could be provided to decision makers of innovation investment.
Details
Keywords
Film provides an alternative medium for assessing our interpretations of cultural icons. This selective list looks at the film and video sources for information on and…
Abstract
Film provides an alternative medium for assessing our interpretations of cultural icons. This selective list looks at the film and video sources for information on and interpretations of the life of Woody Guthrie.
Details
Keywords
ARNOLD BENNETT was a man of two worlds. In the terms of Max Beerbohm's cartoon “Old Self” was plump, wealthy, self‐assured, a landmark of the London scene, a familiar of press…
Abstract
ARNOLD BENNETT was a man of two worlds. In the terms of Max Beerbohm's cartoon “Old Self” was plump, wealthy, self‐assured, a landmark of the London scene, a familiar of press magnates, the owner of a yacht; “Young Self” was thin, ambitious, far‐sighted, industrious, secretly terribly anxious to justify himself to himself and decidedly provincial.