Chinese Manufacturing Firms' Outward Direct Investment: Motivations And Entry Modes

In recent years, the world economy has been changed by the rapid development of emerging economies such as Brazil, Russia, India and China. One obvious change is that foreign direct investment (FDI) from emerging economies increased fast while multinational corporations from these countries highlighted increasingly important role in the world economy. As China's sustained economic growth, China has become the important driving force of the growth of FDI from emerging economies. Especially Chinese manufacturing enterprises are speeding up the pace of expanding overseas which will contribute to China's transformation. Chinese manufacturing enterprises are increasingly active in outward direct investment (ODI) activities. ODI decision-making has become an important strategic issue for Chinese manufacturing enterprises. Formation of investment motivations and choice of entry modes are the key issues that Chinese manufacturing enterprises faced.Since always, motivations and entry modes of FDI are field in strategic management and international business of common concern. Fast growing FDI from emerging economies has caused scholars'rethinking, especially rethink of whether existing theory fully explain this phenomenon in depth. Some scholars agree that theory based on multinational corporations from developed countries can still explain the current emerging economies'ODI. But more scholars debated that compared to euramerican multinationals and multinationals from Japan, South Korea and other new industrialized countries, the firm-specific factors and context factors of emerging economies multinationals showed a big difference. So there is limitation for existing theory to explain FDI from emerging economies. And there is an urgent need for theory development and extension.In this background, this dissertation based on Chinese manufacturing enterprises'ODI and focused on investment motivations and entry modes which are the key issues of ODI decision-making. The aim of this dissertation is to make contribution on explaining FDI from emerging economies and extending existing FDI theory and multinational corporation theory. The main contents in this dissertation have been divided into three sub-researches which attempt to answer each question of followings in turn:(1) what are the investment motivations of firms'ODI in the context of China; (2) what are the effects of firm-specific factors and context factors on investment motivations; (3) what are the effects of investment motivations and context factors on entry modes choice. In the three sub-researches, all of the data are mainly obtained through questionnaire survey.The first sub-research designed the measurement of investment motivations by 7-liket items. The results of exploratory factor analysis and confirmatory factor analysis showed that the validity and reliability are acceptable. Characterized by four variables (dimensions), i.e., resource-seeking, market-seeking, strategic asset-seeking and efficiency-seeking, four categories of mixed investment motivations are identified by using cluster analysis method.The second sub-research analyzed the effects of firm capabilities and environment turbulence on investment motivations. A hierarchical regression analysis was conducted to analyze the relationship between firm capabilities, environment turbulence and four single investment motivations. A multinomial logistic regression analysis was conducted to analyze the effects of firm capabilities and environment turbulence on four categories of mixed investment motivations.The third sub-research analyzed the effects of investment motivations, environment dissimilarity, and investment experience on entry mode choice. A multinomial logistic regression analysis was conducted to analyze the direct effects of investment motivations, environment dissimilarity and investment experience, and the moderating effects of environment dissimilarity and investment experience on entry-mode choice.Based on above researches the results in this dissertation can be summarized as followings:(1) The empirical results confirmed the existence of mixed motivations in Chinese ODI. Four categories of mixed motivations were identified:the organic-growth motivation, the market-expansion motivation, the experiential-learning motivation, and the strategic-leapfrogging motivation. The four categories of mixed motivations are different in performance of four single investment motivations.(2) Firm capabilities and environment turbulence have important effects on investment motivations. Manufacturing capability has positive effect on every kind of investment motivation. Research and development capability and marketing capability has positive effect on market-seeking motivation. Technology turbulence in home country has positive effect on strategic asset-seeking motivation. Technology turbulence and market turbulence in home country has positive effect on market-seeking and strategic asset-seeking motivation.(3) Investment motivations, environment dissimilarity and investment experience have important effects on entry modes choice. Firms are more likely to choose higher resource augmentation entry modes while resource-seeking and strategic asset-seeking motivations are strong, environment dissimilarity between home country and host country is small and firms have investment experience in host country. Environment dissimilarity has negative moderating effect on the relationship between strategic asset-seeking motivation and higher resource augmentation entry modes. Investment experience has positive moderating effect on the relationship between market-seeking motivation and higher resource augmentation entry modes.According to the research results in this dissertation several theoretical innovations and contributions can be summarized as followings:(1) Based on Chinese ODI this dissertation analyzed investment motivations from mixed motivation perspective while existing researches employed single motivation perspective usually. The mixed motivation perspective is more suitable and valuable for analyzing FDI from emerging economies.(2) This dissertation analyzed ODI entry modes from resource augmentation perspective while existing researches employed resource commitment and resource control perspective usually. The resource augmentation perspective is more reasonable in the context of emerging economies'ODI.(3) This dissertation provided a conceptual framework'firm capability-investment motivations-entry modes'for analyzing the mechanism of ODI decision-making in depth. This conceptual framework has made valuable contribution to opening the'black box'of ODI decision-making.