Determinants of outward foreign direct investment entry mode choice: evidence from Chinese-listed companies
ISSN: 1750-614X
Article publication date: 7 May 2021
Issue publication date: 17 January 2022
Abstract
Purpose
The purpose of this paper is to investigate the impact of the nature of firm heterogeneity and factors of the host country on the choice of entry modes in greenfield investments and cross-border mergers and acquisitions.
Design/methodology/approach
An empirical analysis was conducted of 450 outward foreign direct investment (OFDI) cases of Chinese-listed companies from 2001 to 2015. A regression analysis was conducted to determine the influence of the heterogeneous nature of enterprises and host country factors on the choice of entry mode.
Findings
First, the nature of a firm’s heterogeneity differs in terms of their mobile or immobile capabilities, which may affect entry strategies. Second, although Chinese multinational companies do not have a strong ownership advantage when compared with multinational companies in developed countries, they have certain marketing capabilities, such as innovations, aimed at customer needs that make it possible to implement their internationalization strategy. Third, factors such as cultural distance and investment risk of the host country significantly influence the choice of OFDI entry modes.
Originality/value
The authors discuss the mobility of a firm’s resource heterogeneity in determining Chinese firms’ entry mode choices and emphasize that Chinese marketing-intensive firms seek complementary resources from the firms of the host countries to achieve competitive advantages. The authors further divide heterogeneous enterprise resources into research and development resources and marketing resources according to the degree of international mobility and examine what kind of firm heterogeneity could help in the selection of different entry modes.
Keywords
Acknowledgements
The authors would like to sincerely thank the editorial board and two anonymous reviewers for their constructive and useful comments. The authors are also thankful for the support from the Ministry of Education Foundation of China (No. 16YJC790070) and the funding from Hubei Institute of Soft Science on Regional Innovation Capacity Monitoring and Analysis No. HBQY2020z13) Grant.
Citation
Lv, J., Xiong, Y. and Zheng, Y. (2022), "Determinants of outward foreign direct investment entry mode choice: evidence from Chinese-listed companies", Chinese Management Studies, Vol. 16 No. 1, pp. 231-243. https://doi.org/10.1108/CMS-08-2020-0347
Publisher
:Emerald Publishing Limited
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