THE GLOBAL STRATEGY OF EMERGING MULTINATIONALS FROM CHINA

Mike W. Peng

THE ROLE OF HOME COUNTRY GOVERNMENTS

The role of host countrygovernments has attracted significant research attention (Khoury and Peng, 2011; Meyer, Estrin, Bhaumik, and Peng, 2009). What is generallyignored in the recent literature is the role of home country governments of the MNEs undertaking OFDI. This is because up to now, most MNE/FDI research has focused on FDI made by MNEs fromdeveloped economies, and “market-supporting institutions such as pro-OFDI policies by Western governments are now taken for granted and almost lsquo;invisiblersquo;” (Peng, Wang, and Jiang,2008: 927). From an institution-based view, since MNEs are affected by the “rules of the game” bothat home and abroad, the role of home country governments of the MNEs obviously cannot be ignored (Peng et al., 2008: 927). As recently as in the 1960s and the 1970s, the US and UK governments restricted OFDI (De Buele and Van den Bulcke, 2010). Yet, there is hardly any recent research attention devoted to the role of home country governments of MNEs.

The rise of Chinese MNEs has necessitated our attention on the role of home country governments, thus enriching the institution-based view (Cui and Jiang, 2010; Peng, Sun, Pinkham, and Chen, 2009). As an institutional force, the Chinese government has played both a positive and a negative role behind Chinarsquo;s OFDI. Until the mid-1990s, the Chinese government, in an effort to conserve foreign exchange, had severely restricted OFDI. It started to play a more positive role by being more supportive of OFDI starting in the late 1990s (Luo, Xue, and Han, 2010:79). Starting in the early 2000s, the Chinese government has used a series of policy tools such aslow-interest financing, favorable exchange rates, reduced taxation, and subsidized insurance for expatriates tofacilitate OFDI. Clearly, a large number of Chinese firms have responded to these institutional incentives and ventured abroad.

However, the Chinese government has also playeda negative role behind some OFDI from China (Cui and Jiang, 2010). In terms of the destinationsof Chinarsquo;s OFDI, Hong Kong, Cayman Islands, and British Virgin Islands (BVI) routinely occupy the top three positions (Lau and Bruton, 2008; Morck et al., 2008). To put things in perspective, Chinese MNEs invest more in Cayman Islands and BVI than they invest in the United States and Great Britain. Cayman Islands and BVI, in turn, invest more in China than the United States and Great Britain invest in China. The only reason to explain these puzzling FDI patterns is capital round-tripping. In other words, some Chinese MNEs invest in these “tax havens” to transform themselves into “foreign-domiciled” companies, which then can invest in China as foreigninvestors to take advantage of tax and other concessions back home. Hong Kong has long served such a role. But as Chinarsquo;s control over Hong Kong graduallyintensifies, some Chinese MNEs find it necessary to go through the trouble of going to locations as far as the Caribbean in order to avoid being discriminated against at home as domestic firms (Witt and Lewin, 2007; Yamakawa, Peng, and Deeds, 2008). This pattern of Chinarsquo;s OFDI speaks volumes about the negative role played by the Chinese government in terms of its discrimination against certain domestic firms,especially non-state-owned ones (Ahlstrom, Chen, and Yeh, 2010; Huang, 2003).

GOING ABROAD WITHOUT SUPERIOR RESOURCES

Popularized as the ownership-location-internalization (OLI) framework, the standard explanation of FDI is that MNEs possess and leverage superior technological and managerial resources that enable them to enter new markets. However, the emergence of Chinese MNEs creates a puzzle that challenges some of this conventional wisdom.Although these emerging multinationals, like their old-line counterparts fromdeveloped economies,hunt for lucrative locations and internalize transactions—conforming to the L and I parts of the OLI framework—they typically do not own better technology and their management capabilities are usually not world class (Barnard, 2010). In other words,a big chunk of the O part seems to be missing (Gammeltoft et al., 2010; Mathews, 2006).

For example, in semiconductor wafer factories, Chinese technologies are “at least two generations behind those of Taiwan, the United States, Japan, and South Korea” (BusinessWeek, 2009: 42). In internal-combustion engines, Chinese automakers are still “10-20 years” behind leading firms (Tao, 2011: 293). In terms of managerial resources, Chinese MNEsclearly lack English-speaking, internationally savvy managers comfortable interacting with local managers, employees, and politicians in host countries.

For example, the first Chinese manager interviewed in Fortunersquo;s (2010: 87) cover story about Chinarsquo;s OFDI in the United States, who was featured with a half-page photo, had to speak to the Fortunereporter through an interpreter. Many Chinese executives are ignorant of the “rules of the game” overseas. When lecturing in China, I have found that many executives are not aware thatwhen entering the United States,they cannot talk to competitors and discuss pricing—otherwise they could go to jail for antitrust violations. The fact that these executives are on the verge of leading their firms overseas suggests that managers at Chinese MNEs have a long way to go before they are able to master international norms and regulations, some of which are very different from their familiar “rules of the game” at home.

Anecdotes aside, the regional distribution of Chinarsquo;s OFDI stock shows that Chinese MNEs are not comfortable competing globally. Figure 1 illustrates that despite media headlines about Chinarsquo;s OFDI in Africa, only 4% went to Africa. Hong Kong commanded a lionrsquo;s share of 66%, and the rest of Asia received another 9%. Of the 12%

剩余内容已隐藏，支付完成后下载完整资料

THE GLOBAL STRATEGY OF EMERGING MULTINATIONALS FROM CHINA

Mike W. Peng

THE ROLE OF HOME COUNTRY GOVERNMENTS

The role of host country governments has attracted significant research attention (Khoury and Peng, 2011; Meyer, Estrin, Bhaumik, and Peng, 2009). What is generally ignored in the recent literature is the role of home country governments of the MNEs undertaking OFDI. This is because up to now, most MNE/FDI research has focused on FDI made by MNEs from developed economies, and “market-supporting institutions such as pro-OFDI policies by Western governments are now taken for granted and almost lsquo;invisiblersquo;” (Peng, Wang, and Jiang,2008: 927). From an institution-based view, since MNEs are affected by the “rules of the game” both at home and abroad, the role of home country governments of the MNEs obviously cannot be ignored (Peng et al., 2008: 927). As recently as in the 1960s and the 1970s, the US and UK governments restricted OFDI (De Buele and Van den Bulcke, 2010). Yet, there is hardly any recent research attention devoted to the role of home country governments of MNEs.

The rise of Chinese MNEs has necessitated our attention on the role of home country governments, thus enriching the institution-based view (Cui and Jiang, 2010; Peng, Sun, Pinkham, and Chen, 2009). As an institutional force, the Chinese government has played both a positive and a negative role behind Chinarsquo;s OFDI. Until the mid-1990s, the Chinese government, in an effort to conserve foreign exchange, had severely restricted OFDI. It started to play a more positive role by being more supportive of OFDI starting in the late 1990s (Luo, Xue, and Han, 2010:79). Starting in the early 2000s, the Chinese government has used a series of policy tools such as low-interest financing, favorable exchange rates, reduced taxation, and subsidized insurance for expatriates to facilitate OFDI. Clearly, a large number of Chinese firms have responded to these institutional incentives and ventured abroad.

However, the Chinese government has also played a negative role behind some OFDI from China (Cui and Jiang, 2010). In terms of the destinations of Chinarsquo;s OFDI, Hong Kong, Cayman Islands, and British Virgin Islands (BVI) routinely occupy the top three positions (Lau and Bruton, 2008; Morck et al., 2008). To put things in perspective, Chinese MNEs invest more in Cayman Islands and BVI than they invest in the United States and Great Britain. Cayman Islands and BVI, in turn, invest more in China than the United States and Great Britain invest in China. The only reason to explain these puzzling FDI patterns is capital round-tripping. In other words, some Chinese MNEs invest in these “tax havens” to transform themselves into “foreign-domiciled” companies, which then can invest in China as foreign investors to take advantage of tax and other concessions back home. Hong Kong has long served such a role. But as Chinarsquo;s control over Hong Kong gradually intensifies, some Chinese MNEs find it necessary to go through the trouble of going to locations as far as the Caribbean in order to avoid being discriminated against at home as domestic firms (Witt and Lewin, 2007; Yamakawa, Peng, and Deeds, 2008). This pattern of Chinarsquo;s OFDI speaks volumes about the negative role played by the Chinese government in terms of its discrimination against certain domestic firms, especially non-state-owned ones (Ahlstrom, Chen, and Yeh, 2010; Huang, 2003).

GOING ABROAD WITHOUT SUPERIOR RESOURCES

Popularized as the ownership-location-internalization (OLI) framework, the standard explanation of FDI is that MNEs possess and leverage superior technological and managerial resources that enable them to enter new markets. However, the emergence of Chinese MNEs creates a puzzle that challenges some of this conventional wisdom. Although these emerging multinationals, like their old-line counterparts from developed economies, hunt for lucrative locations and internalize transactions—conforming to the Land I parts of the OLI framework—they typically do not own better technology and their management capabilities are usually not world class (Barnard, 2010). In other words, a big chunk of the O part seems to be missing (Gammeltoft et al., 2010; Mathews, 2006).

For example, in semiconductor wafer factories, Chinese technologies are “at least two generations behind those of Taiwan, the United States, Japan, and South Korea” (BusinessWeek, 2009: 42). In internal-combustion engines, Chinese automakers are still “10-20 years” behind leading firms (Tao, 2011: 293). In terms of managerial resources, Chinese MNEs clearly lack English-speaking, internationally savvy managers comfortable interacting with local managers, employees, and politicians in host countries.

For example, the first Chinese manager interviewed in Fortunersquo;s (2010: 87) cover story about Chinarsquo;s OFDI in the United States, who was featured with a half-page photo, had to speak to the Fortune reporter through an interpreter. Many Chinese executives are ignorant of the “rules of the game” overseas. When lecturing in China, I have found that many executives are not aware that when entering the United States, they cannot talk to competitors and discuss pricing—otherwise they could go to jail for antitrust violations. The fact that these executives are on the verge of leading their firms overseas suggests that managers at Chinese MNEs have a long way to go before they are able to master international norms and regulations, some of which are very different from their familiar “rules of the game” at home.

Anecdotes aside, the regional distribution of Chinarsquo;s OFDI stock shows that Chinese MNEs are not comfortable competing globally. Figure 1 illustrates that despite media headlines about Chinarsquo;s OFDI in Africa, only 4% went to Africa. Hong Kong commanded a lionrsquo;s share of 66%, and the rest of Asia received anot

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