Hinrich Voss

The Impact of Home Country Institutional Effects on the Internationalization Strategy of Chinese Firms

Mainland Chinese firms have become important international investors. Many have gained their capabilities to internationalize in a domestic institutional environment characterised by significant market imperfections. In this study, we argue that the imperfections affect firm behavior depending on firm size, ownership form, and location. We find preliminary support for the notion that large, well-connected Chinese firms benefit most from institutional advantages, but that smaller firms internationalize because of institutional constraints. This represents a more nuanced view of the determinants of Chinese firm internationalization than is evident in prior research, with consequences for future theorising and empirical research on Chinese MNEs.

The Determinants of Chinese Outward Direct Investment

The rapid international expansion of Chinese enterprises since the 1990s has attracted considerable attention in scholarly and policy circles. This book sheds fresh light on the phenomenon by explaining its determinants using the analytical lens of international business theory.

Determinants of national innovation systems: Policy implications for developing countries

The importance of National Innovation Systems (NIS) for the economic performance of a country is widely acknowledged. In order to close the development gap, it is crucial for developing countries to identify the degree to which knowledge institutions, governments and business corporations determine NIS and deduce relevant innovation policies from this. We model and estimate their relationship from a network perspective for NIS of 46 developed economies and emerging markets at the macro level using secondary data from a series of international measures. We find that, while the structural dynamics of knowledge management, decision-making, government-business relations and the market are crucial to NIS behaviour, overall innovation in this context is dominated by market forces. This implies developing economies should focus on establishing an institutional environment that supports markets and market transactions which, subsequently, supports the domestic NIS and economic growth.

What Can Emerging Markets Learn from the Outward Direct Investment Policies of Advanced Countries

In scholarly and political circles, the economic gains to a country of attracting inward foreign direct investment (IFDI) are now largely uncontested. Such investments are generally perceived to bring a number of benefits to a host economy, not least in relation to employment, productivity levels, organizational and managerial practices, backward and forward linkages, technology, and greater participation in the international division of labor (Buckley and Casson 1998). In recognition of these benefits, much of the policy debate concerning foreign direct investment (FDI) has revolved around IFDI policies and international investment agreements (IIAs), with capital exporting countries usually seeking greater market access, nondiscriminatory treatment, and investment protection in host countries that improves the competitiveness of their own multinational enterprises (MNEs), and developing countries offering increasingly attractive investment policy regimes (UNCTAD 1995). One outcome is that policies toward IFDI have now become relatively well established, wide ranging, and transparent among both developed and developing countries. At the same time, our understanding of the relationship between policy and inward investing firm behavior is reasonably well advanced (Rugman and Brewer 2001).

An Assessment of the Effects of Institutional Change on Chinese Outward Direct Investment Activity

Since the instigation of the “open-door” policies (gaige kaifang,) in 1978, China has experienced three decades of considerable economic and institutional reform. These reforms have been directed towards changing the domestic industrial structure and increasing the degree of integration of China’s economy and its businesses into the global economy. At the same time, China has evolved from a position of marginal relevance in terms of its outward foreign direct investment (OFDI) levels to becoming an important source country, especially among developing countries. To illustrate, the Chinese Ministry of Commerce reports that domestic firms invested US

A retrospective and agenda for future research on Chinese outward foreign direct investment

21 billion abroad in 2006, raising China’s OFDI stock to US

The Emergence of Chinese Firms as Multinationals: The Influence of the Home Institutional Environment

90 billion (MOFCOM, 2007).

Risk propensity in the foreign direct investment location decision of emerging multinationals

Our original 2007 Journal of International Business Studies article, “The determinants of Chinese Outward Foreign Direct Investment”, was the first theoretically based empirical analysis of the phenomenon. It utilised internalisation theory to explain the internationalisation of Chinese state-owned enterprises. This paper showed that we had failed to ask sufficiently challenging questions about the effects of home country institutions on outward foreign direct investment (OFDI). This Retrospective builds on the extensive subsequent research to show the importance of context in constructing satisfactory theoretical explanations of OFDI. Building on these foundations, we propose research challenges for the next decade on Chinese OFDI that transcend the Chinese context and have wider theoretical applicability. Examining alternative forms of social and economic organisation allows the creation of special theories of foreign direct investment nested within the general theory. Following such a strategy would enable International Business research to make a contribution across the social sciences.RésuméNotre article original de 2007 publié dans Journal of International Business Studies, “The determinants of Chinese Outward Foreign Direct Investment”, a été la première analyse empirique fondée sur une théorie du phénomène. Elle a utilisé la théorie de l’internalisation pour expliquer l’internationalisation des entreprises publiques chinoises. Cet article a montré que nous n’avions pas posé de questions suffisamment difficiles sur les effets des institutions du pays d’origine sur l’investissement direct étranger sortant (IDES). Cette rétrospective s’appuie sur les nombreuses recherches qui ont suivi pour montrer l’importance du contexte dans la construction d’explications théoriques satisfaisantes de l’IDES. S’appuyant sur ces fondations, nous proposons des défis de recherche pour la prochaine décennie sur les IDES chinois qui transcendent le contexte chinois et ont une plus large applicabilité théorique. L’examen de formes alternatives d’organisation sociale et économique permet la création de théories particulières sur l’investissement étranger direct imbriquées dans la théorie générale. Adopter une telle stratégie permettrait à la recherche en International Business de faire une contribution au niveau des sciences sociales.ResumenNuestro artículo publicado originalmente en el 2007 en el Journal of International Business Studies, “Los determinantes de la inversión extranjera directa saliente china”, fue el primer análisis empírico basado en teoría del fenómeno. Este usa la teoría de internalización para explicar la internacionalización de las empresas estatales chinas. Este documento demostró que no habíamos formulado preguntas suficientemente retadoras sobre los efectos de las instituciones del país de origen en la inversión extranjera directa saliente (IEDS). Esta Retrospectiva se basa en la extensiva investigación subsecuente para mostrar la importancia del contexto en la construcción de explicaciones teóricas satisfactorias de la IEDS. Sobre la base de estos fundamentos, proponemos retos de investigación para la próxima década sobre la IEDS china que trasciende el contexto chino y que tiene una amplia aplicabilidad teórica. La examinación de formas alternativas de organización social y económica permite la creación de teorías especiales de inversión extranjera directa anidadas en la teoría general. Seguir esta estrategia permitiría a la investigación en Negocios Internacionales hacer contribuciones transversalmente a las ciencias sociales.ResumoNosso artigo original do Journal of International Business Studies de 2007, “Os determinantes do investimento direto externo chinês para o estrangeiro”, foi a primeira análise empírica do fenômeno com base teórica. Ele utilizou a teoria da internalização para explicar a internacionalização das empresas estatais chinesas. Esse artigo mostrou que falhamos em fazer perguntas suficientemente desafiadoras sobre os efeitos das instituições do país de origem sobre o investimento direto externo para o estrangeiro (OFDI). Esta Retrospectiva baseia-se na extensa subsequente pesquisa para mostrar a importância do contexto na construção de explicações teóricas satisfatórias de OFDI. Com base nesses fundamentos, propomos desafios de pesquisa para a próxima década sobre os OFDI chineses que transcendem o contexto chinês e têm maior aplicabilidade teórica. O exame de formas alternativas de organização social e econômica permite a criação de teorias especiais de investimento direto estrangeiro aninhadas na teoria geral. Ao seguir essa estratégia, a pesquisa em negócios internacionais pode fazer uma contribuição para as ciências sociais.概要我们最初在2007年发表于《国际商务研究期刊》的文章“中国对外直接投资的决定因素”是对这一现象的第一个基于理论的实证分析。它运用内部化理论来解释中国国有企业的国际化。本文表明,我们当时并没能就本国制度对对外直接投资(OFDI)的影响提出有足够挑战性的问题。这篇回顾文章建立在广泛的后续研究之上,以表明在构建令人满意的对外直接投资理论解释中情境的重要性。建于这些基础之上,我们提出了未来十年中国对外直接投资的研究挑战,这些挑战超越中国情境,并具有更广泛的理论适用性。研究社会及经济组织的替代形式可以创建嵌套在通用理论中的外国直接投资的特殊理论。遵循这样的策略将使国际商业研究能够为整个社会科学做出贡献。

Inside the China–EU FDI Bond

This original and important book explores how the interaction between China and multinational enterprises has the potential to affect the future of the Chinese economy, the global economy, and international business.

Chinese Overseas Direct Investment into the European Union

A distinguishing feature of emerging economy multinationals is their apparent tolerance for host country institutional risk. Employing behavioral decision theory and quasi-experimental data, we find that managers’ domestic experience satisfaction increases their relative risk propensity regarding controllable risk (legally protectable loss), but decreases their tendency to accept noncontrollable risk (e.g., political instability). In contrast, firms’ potential slack reduces relative risk propensity regarding controllable risk, yet amplifies the tendency to take noncontrollable risk. We suggest that these counterbalancing effects might help explain prior ambiguous findings on the relationship between experience, slack, and FDI decisions. The study provides a new understanding of why firms exhibit heterogeneous responses to host country risks, and the varying effects of institutions.RésuméUne caractéristique spécifique des multinationales des économies émergentes est leur tolérance apparente à l’égard du risque institutionnel du pays d’accueil. En mobilisant la théorie de la décision comportementale et des données quasi-expérimentales, nous constatons que la satisfaction de l’expérience domestique des dirigeants augmente leur propension relative au risque concernant le risque contrôlable (la perte de protection au niveau légal), mais diminue leur tendance à accepter le risque non-contrôlable (par exemple, l’instabilité politique). En revanche, le relâchement potentiel des firmes réduit la propension relative au risque concernant le risque contrôlable, mais amplifie la tendance à prendre un risque non-contrôlable. Nous suggérons que ces effets d’équilibrage pourraient expliquer les résultats antérieurs contradictoires concernant la relation entre l’expérience, le relâchement et les décisions d’investissements directs à l’étranger. L’étude fournit un nouvel éclairage sur les raisons pour lesquelles les firmes développent des réponses hétérogènes par rapport aux risques du pays d’accueil et sur les effets variables des institutions.ResumenUna característica diferenciadora de las multinacionales de economías emergentes es su tolerancia al riesgo institucional en el país anfitrión. Usando la teoría de decisión conductual y datos cuasi-experimentales, encontramos que la satisfacción de la experiencia doméstica de los gerentes aumenta su propensión al riesgo relativo en relación al riesgo controlable (perdida legalmente protegible), pero disminuye su tendencia a aceptar riesgos no controlables (por ejemplo, inestabilidad política). En contraste, la holgura potencial de la empresa reduce la propensión al riesgo relativo en relación al riesgo controlable, aunque amplifica la tendencia a tomar riesgos no controlables. Sugerimos que estos efectos de contrapeso podrían a ayudar a explicar los hallazgos ambiguos anteriores sobre la relación entre experiencia, la holgura, y las decisiones de IED. El estudio proporciona un nuevo entendimiento del por qué las empresas muestran respuestas heterogéneas a los riesgos del país anfitrión, y los diversos efectos de las instituciones.ResumoUma característica que distingue multinacionais de economia emergente é a sua aparente tolerância para o risco institucional do país anfitrião. Usando a teoria da decisão comportamental e dados quase experimentais, descobrimos que a satisfação de gerentes com experiências domésticas aumenta sua relativa propensão ao risco em relação ao risco controlável (perda legalmente protegida), mas diminui sua tendência para aceitar riscos não controláveis (por exemplo, instabilidade política). Em contrapartida, a folga potencial das empresas reduz a propensão ao risco relativo em relação ao risco controlável, mas amplifica a tendência de assumir riscos não controláveis. Sugerimos que esses efeitos que se contrabalançam possam ajudar a explicar anteriores conclusões ambíguas sobre a relação entre a experiência, a folga e as decisões de FDI. O estudo fornece uma nova compreensão de por que as empresas apresentam respostas heterogêneas aos riscos do país anfitrião e os efeitos variados das instituições.摘要新兴经济体跨国公司的一个显著特征是对东道国制度风险明显的容忍。运用行为决策理论和准实验数据,我们发现管理者国内经验的满意度增加他们对可控风险(受法律保护的损失)的相对风险倾向,但减少他们对非可控风险(比如政治动荡)的接受度。相比之下,公司的潜在冗余减少可控风险的相对风险倾向,但扩大承担非可控风险的倾向。我们认为这些相互制衡的作用可能解释此前研究中关于经验、冗余和对外直接投资决策之间关系的含糊结论。本研究对为什么公司对东道国的风险呈不同反应,以及制度的不同影响提供了一个新认识。