Skip to main content

The Internationalization of Chinese Firms: A Case for Theoretical Extension?1

  • John Child (a1) and Suzana B. Rodrigues (a1)

This paper examines the patterns of, and motives for, internationalization by prominent market-seeking Chinese firms. Case studies of these firms indicate that they are seeking technological and brand assets to create a competitive position in international markets. While mainstream theory tends to assume that firms internationalize to exploit competitive advantages, Chinese firms are generally making such investments in order to address competitive disadvantages. They are engaging in ‘inward’ internationalization by means of original equipment manufacture (OEM) and joint venture partnerships, and ‘outward’ internationalization by means of acquisition and organic expansion abroad. Each of these routes offers certain benefits coupled with its own challenges or risks. The paper concludes that the Chinese case offers an opportunity to extend present theorizing in four primary areas concerning the latecomer perspective and catch-up strategies, institutional analysis with reference to the role of government, the relations between entrepreneurs and institutions, and the liability of foreignness.

Hide All

The authors wish to thank Yadong Luo, MOR Senior Editor, and reviewers for their insightful and positive comments on an earlier version of this paper.

Hide All
Asia Pacific Bulletin (2004). ‘Is China becoming a global investor?’ September 10, www.asiapaci
Barney, J. B., (1991). Firm resources and sustained competitive advantage’. Journal of Management, 17, 99120.
Boisot, M. (2004). Notes on the internationalization of Chinese firms. Unpublished paper, Open University of Catalonia, Barcelona, Spain.
Boisot, M. and Child, J. (1996). ‘From fiefs to clans and network capitalism: Explaining China's emerging economic order’. Administrative Science Quarterly, 41, 600–28.
Brown, R. A. (Ed.) (1995). Chinese Business Enterprise in Asia. London: Routledge.
Buckley, P. J. and Casson, M. C. (1976). The Future of the Multinational Enterprise. London: Macmillan.
Buckley, P. J. and Ghauri, P. N. (Eds.) (1999). The Internationalization of the Firm. London: Thomson Business Press.
Buckley, P.J. and Mirza, H. (1988). ‘The strategy of Pacific Asian multinationals’. Pacific Review, 1, 5062.
Business Week (2002). ‘High tech in China: Is it a threat to Silicon Valley?’ October 28, 4456.
Business Week (2003). ‘Jumping the hurdles at Huawei’. December 22, 22–3.
Business Week (2004a). ‘China goes shopping’. December 20, 3032.
Business Week (2004b). ‘Big Blue's bold step into China’. December 20, 33–4.
Business Week (2004c). ‘China's power brands’. November 8, 4450.
Cai, K. G. (1999). ‘Outward foreign direct investment: A novel dimension of China's integration into the regional and global economy’. China Quarterly, 160, 856–80.
Caves, R. E. (1971). ‘International corporations: The industrial economics of foreign investment’. Economica, 38, 117.
Chen, M. (2004). Asian Management Systems. London: Thomson, 2nd edition.
Chen, X-P. and Chen, C. C. (2004). ‘On the intricacies of the Chinese guanxi: A process model of guanxi development’. Asia Pacific Journal of Management, 21, 305–24.
Child, J., Faulkner, D. and Pitkethly, R. (2001). The Management of International Acquisitions. Oxford: Oxford University Press.
Child, J., Ng, S-H. and Wong, C. (2002). ‘Psychic distance and internationalization: A critical examination’. International Studies of Management and Organization, 32, 3656.
Child, J. and Tse, D. K. (2001). ‘China's transition and its implications for international business’. Journal of International Business Studies, 32, 521.
Child, J. and Yan, Y. (2001). ‘National and transnational effects in international business: Indications from Sino-foreign joint ventures’. Management International Review, 41, 5375.
Chung, O. (2004). ‘Outward FDI tops US$33bn’. The Standard, October 7,
Deng, P. (2004). ‘Outward investment by Chinese MNCs: Motivations and implications’. Business Horizons, 47, 816.
Dore, R. (1973). British Factory - Japanese Factory. London: Allen & Unwin.
Dunning, J. H. (1981). International Production and the Multinational Enterprise. London: Allen & Unwin.
Dunning, J. H. (2001). ‘The eclectic (OLI) paradigm on international production: Past, present and future’. International Journal of the Economics of Business, 8, 173–90.
Dunning, J. H. and Narula, R. (Eds.) (1996). Foreign Direct Investment and Governments: Catalysts for Economic Restructuring. London: Routledge.
Fang, P. (2002). The Refrigerator Industry in China and Strategies for Chinese Companies. Unpublished MBA dissertation, University of Birmingham.
Financial Times (2004a). ‘Chinese carmaker negotiates for stake in MG Rover’. November 22, 2.
Financial Times (2004b). ‘Lenovo buys IBM's PC unit for $1.75bn’. December 9, 21.
Financial Times (2004c). ‘IBM brand loyalty holds key for Lenovo’. December 9, 26.
Finfacts (2005). ‘China's exports surge by 32.7% in first half of 2005’., July 13.
Garnaut, R. and Song, L. (Eds.) (2004). China's Third Economic Transformation: The Rise of the Private Economy. London: Routledge Curzon.
Granovetter, M. (1985). ‘Economic action and social structure: The problem of embeddedness’. American Journal of Sociology, 91, 481510.
Gulati, R., Nohria, N. and Zaheer, A. (2000). ‘Strategic networks’. Strategic Management Journal, Special Issue, 21, 203–15.
Guthrie, D. (2005). ‘Organizational learning and productivity: State structure and foreign investment in the rise of the Chinese corporation’. Management and Organization Review, 1, 165–95.
Hennert, J-F. (2001). ‘Theories of the multinational enterprise’. In Rugman, A. M. and Brewer, T. L. (Eds.), The Oxford Handbook of International Business (pp. 127–49). Oxford: Oxford University Press.
Hitt, M. A., Ahlstrom, D., Dacin, M. T., Levitas, E. L. and Svobodina, L. (2004). ‘The institutional effects on strategic alliance partner selection in transition economies: China vs. Russia’. Organization Science, 15, 173–85.
Hitt, M. A., Ireland, R. D., Camp, S. M. and Sexton, D. L. (2001). ‘Strategic entrepreneurship: Entrepreneurial strategies for wealth creation’. Strategic Management Journal, Special Issue, 22, 479–91.
Huang, Y. (2003). Selling China: Foreign Direct Investment during the Reform Era. Cambridge: Cambridge University Press.
Inkpen, A. C. (1995). The Management of International Joint Ventures: An Organizational Learning Perspective. London: Routledge.
Johanson, J. and Vahlne, J. E. (1977). ‘The internationalization process of the firm. A model of knowledge development and increasing foreign market commitments’. Journal of International Business Studies, 8, 2232.
Johanson, J. and Wiedersheim-Paul, F. (1975). ‘The internationalization of the firm. Four Swedish cases’. Journal of Management Studies, 12, 305–22.
Kiran, V. B. (2004). Haier: Developing a Global Brand. Case #304-264-1, Hyderabad: ICFAI Business School, Case Development Centre.
Kumar, K. and Mcleod, M. G. (Eds.) (1981). Multinationals from Developing Countries. Lexington, MA: Lexington Books.
Lall, S. (1984). The New Multinationals. New York: Wiley.
Lecraw, D.J. (1977). ‘Direct investment by firms from less developed countries’. Oxford Economic Papers, 29, 442–57.
Lecraw, D.J. (1993). ‘Outward direct investment by Indonesian firms: Motivation and effects’. Journal of International Business Studies, 24, 589600.
Lewin, A. Y., Long, C. P. and Carroll, T. N. (1999). ‘The coevolution of new organizational forms’. Organization Science, 10, 535–50.
Marsh, P. (2005). ‘Rise in plant automation improves China's competitive advantage’. Financial Times, June 3, 12.
Matthews, J. A. (2002). ‘Competitive advantages of the latecomer firm: A resource-based account of industrial catch-up strategies’. Asia Pacific Journal of Management, 19, 467–88.
McDougall, P. P. and Oviatt, B. M. (2000). ‘International entrepreneurship: The intersection of two research paths’. Academy of Management Journal, 43, 902–6.
McGregor, R. and Guerrera, F. (2004). ‘Chinese companies acquire a taste for western targets’. Financial Times, October 19, 20.
McGregor, R. (2005). ‘Spending spree leaves Beijing nerves frayed’. Financial Times, March 8, 12.
Meyer, J. W. and Scott, W. R. (Eds.) (1983). Organizational Environments: Ritual and Rationality. Thousand Oaks, CA: Sage.
Meyer, M. W. and Lu, X. (2004). ‘Managing indefinite boundaries: The strategy and structure of a Chinese business firm’. Management and Organization Review, 1, 5786.
Ministry of Commerce (2005). China Outbound Investments Statistics Report for 2004. Beijing: Ministry of Commerce and State Statistical Bureau.
Moingeon, B. and Edmonson, A., (Eds.) (1996). Organizational Learning and Competitive Advantage. Thousand Oaks, CA: Sage.
Nolan, P. (2001). China and the Global Economy. Basingstoke, UK: Palgrave.
Peerenboom, R. (2001). ‘Globalization, path dependency and the limits of law: Administrative law reform and the rule of law in the People's Republic of China’. Berkeley Journal of International Law, 19, 161264.
Peng, M. W. (2000). Business Strategies in Transition Economies. Thousand Oaks, CA: Sage.
Peng, M. W. (2005). ‘Perspectives - from China strategy to global strategy’. Asia Pacific Journal of Management, 22, 123–41.
Quan, Y. (2001). ‘Access to the WTO and internationalization strategy of Chinese companies’. Enterprise Studies, 8, 1224.
Rodrigues, S. B. and Child, J. (2003). ‘Co-evolution and transformation in times of deconstruction: A dynamic multi-level process’. Journal of Management Studies, 40, 2137–62.
Safarian, A. E. (2003). ‘Internalization and the MNE: A note on the spread of ideas’. Journal of International Business Studies, 34, 116–24.
Scott, W. R. (1995). Institutions and Organizations. Thousand Oaks, CA: Sage.
Simonin, B. L. (2004). An empirical investigation of the process of knowledge transfer in international strategic alliances’. Journal of International Business Studies, 35, 407–27.
The Economist (2004). ‘Chinese business: Champ or chump?’ December 11th, 68–9.
The Economist (2005). ‘The dragon tucks in’. July 2, 70–2.
The Guardian (2004). ‘Notebook: Rover is more than a Chinese whisper from a deal’. November 23, 17.
Ting, W. (1985). Business and Technological Dynamics in Newly Industrializing Asia. Westport, CN: Quorum Books.
Toyne, B. and Nigh, D. (1998). ‘A more expansive view of international business’. Journal of International Business Studies, 29, 863–76.
Tseng, C-S. (1994). ‘The process of internationalization of PRC multinationals’. In Schultte, H. (Ed.). The Global Competitiveness of the Asian Firm. Basingstoke, UK: Macmillan.
UNCTAD (United Nations Conference on Trade and Development) (2004). World Investment Report 2004. New York: United Nations.
Warner, M., Ng, S-H. and Xu, X. (2004). “‘Late development” experience and the evolution of transnational firms in the People's Republic of China’. Asia Pacific Business Review, 10, 324–45.
Wells, L. T. Jr. (1983). Third World Multinationals: The Rise of Foreign Direct Investment from Developing Countries. Cambridge, MA: MIT Press.
Wesson, T. (1999). A model of asset-seeking foreign direct investment driven by demand conditions’. Canadian Journal of Administrative Sciences, 16, 110
Williams, F. (2005). ‘China overtakes Japan as third largest exporter’. Financial Times, April 15, 9.
Yeung, H. W-C. and Olds, K. (Eds.) (2000). Globalization of Chinese Business Firms. New York: St. Martin's Press.
Zaheer, S. (1995). ‘Overcoming the liability of foreignness’. Academy of Management Journal, 38, 341–63.
Zeng, M. and Williamson, P.J. (2003). ‘The hidden dragons’. Harvard Business Review, October, 92–9.
Zhang, H.Y and Van Den Bulcke, D. (1996). ‘International management strategies of Chinese multinational firms’. In Child, J. and Lu, Y., (Eds.) Management Issues in China: International Enterprises (pp. 141–64). London: Routledge.
Zhang, J. (2005). ‘China's corporate cost advantage is a myth’. Financial Times, April 29, 19.
Zhang, W. (2003). Brand value and strategy. Working Paper Guanghua School of Management, Peking University, China.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Management and Organization Review
  • ISSN: 1740-8776
  • EISSN: 1740-8784
  • URL: /core/journals/management-and-organization-review
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed