Academic journal article Management International Review

Is the Strategic Asset Seeking Investment Proclivity of Chinese MNEs Different to That of Developed Market MNEs? A Comparative Analysis of Location Choice and Orientation

Academic journal article Management International Review

Is the Strategic Asset Seeking Investment Proclivity of Chinese MNEs Different to That of Developed Market MNEs? A Comparative Analysis of Location Choice and Orientation

Article excerpt

1 Introduction

Extant theory on the internationalization strategies of MNEs suggests they invest abroad in order to exploit pre-existing firm-specific advantages (FSAs) in new markets. This idea, however, has, been questioned owing to the rise of emerging market (E)MNEs, especially those from China. Chinese (C)MNEs, some argue, are not typically seen to possess traditional ownership advantages, ones that may be meaningfully exploited in developed markets (Deng 2009; Rugman and Li 2007). Their outward FDI strategies are therefore considered poorly explained by existing theory, prompting calls for new or revised theoretical contributions to explain their behaviors (Buckley et al. 2007; Child and Rodrigues 2005; Luo and Tung 2007; Mathews 2006). The enigmatic situation of FDI flows from CMNEs to developed markets has now spurred significant amounts of research on the topic (Sutherland and Anderson 2015). Many of these comment upon the nature of CMNEs' strategic asset seeking (SAS) orientation.

SAS FDI is generally considered to involve processes that augment areas of perceived competitive disadvantages in CMNEs. This is done through the acquisition of a variety of (often intangible) assets, such as brand names, technologies and managerial competencies (Dunning 2009; Mathews 2006; Sun et al. 2012). CMNE SAS strategies are thought to be driven by their comparatively low levels of strategic assets in comparison to their developed market (D)MNE competitors (Luo and Tung 2007; Rui and Yip 2008). Some argue SAS investments are especially common among CMNEs, as they look to rapidly catch-up with their DMNE counterparts (Rui and Yip 2008), aided at times by state support (Wang et al. 2012) and a number of other favorable domestic home market conditions. This includes: access to complementary local resources (Hennart 2012); asymmetries in liabilities of foreignness (Petersen and Seifert 2014); business group affiliation (Yiu 2011); and the imperative to catch-up and learn from foreign rivals (Child and Rodrigues 2005; Mathews 2006). Much research has thus highlighted CMNE FDI behavior as being characterized by comparatively rapid, high risk investments, often to psychically distant developed markets. Many of these investments seem to be undertaken with a view to acquiring the strategic assets CMNEs lack for the purposes of firm-level catch-up (Luo and Tung 2007; Mathews 2006). This 'asset augmentation' approach in CMNEs, undertaken to develop firm-specific advantages (FSAs), is considered distinct from the more traditional type of FSA 'exploitation' strategies seen in DMNEs (Kedia et al. 2012).

We contend the mooted SAS FDI orientation of CMNEs in developed markets has gained particular prominence in academic circles because of its important implications for theory (Hennart 2012; Luo and Tung 2007; Mathews 2002; Ramamurti 2012; Rui and Yip 2008). Interestingly, however, discussion and reflection upon the type of systematic empirical evidence required to support the SAS thesis, as well as detailed and rigorous testing of the actual claim, is still very limited. Here, therefore, we look to directly explore this issue. To this end, we first summarize the empirical evidence related to the CMNE SAS claim, focusing particularly on the dominant location choice type studies. Second, we develop several hypotheses related to the SAS orientation of CMNEs as well as two tests of CMNE SAS. One test uses comparative location choice methodologies, the other an alternative, more direct approach using firm-level data. As well as some differences between CMNEs and DMNEs, we interestingly also find strong similarities. Thus, contrary to much previous research, we are reluctant to conclude that CMNEs are truly different because of their SAS orientation or the role of underlying FSAs driving such strategies. Our discussion further reflects upon the challenges involved in testing the SAS thesis with regards to CMNEs and DMNEs as distinct groups and capturing the role of underlying FSAs as drivers of SAS activity. …

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