Study On The Motives And Establishment Mode Choice Of Outward FDI By Emerging Market Firms: Evidence From China

International expansion of emerging market firms (EMFs) have emerged as a new forefront in international business(IB) research(Luo and Tung,2007, Peng, Bhagat and Chang,2010). While outward FDI (OFDI) from emerging economies, in itself, is not new, the unprecedented rise of it has achieved the interest of practitioners as well as academics(Gammeltoft, et al.,2010, Sauvant, et al.,2010).Firms from emerging economies have increasingly surprised observers not only by how rapidly they are internationalizing, but also by their bold and aggressive methods in the early stages of their outward expansion. These new phenomena seem to nullify existing internationalization, multinational enterprises (MNEs), and Foreign Direct Investment (FDI) theories which explain the MNEs from developed economies based on monopolistic advantages such as technological superiority. In addition, most studies on EMFs only explained the increase of FDI, and revealed that the relation between economy development level of the country and FDI from point of view of economics. However, it does not give sufficient attention about the motives and the mode choice from the enterprise level.Therefore, in order to fill these gaps, this paper studies the OFDI of EMFs, and constructed integrating frameworks to explain and analyze the motives and the determinants of establishment mode choice on resource/capability-based view, institution-based view, transaction cost theory, and industrial organization theory et al. This article consists of two main parts:First, it applied inductive multi-case study to undertake exploratory research using four Chinese firms. Second, it also tested the integrating frameworks and the hypotheses by issuing 116 questionnaire surveys of Chinese enterprises. It identified and explained the motives of EMFs' OFDI applying factor analysis. Besides, it used binary logistic regression model to test the independent variables and control variables in establishment mode choice of EMFs as well as. These qualitative and quantitative results were compared to each other, and to other researchers' findings. The main findings are as follows: Above all, as far as the motives of EMFs' OFDI are concerned, this paper advanced a framework on resource/capability based view and institutional perspective. First, in resource/capability based view, EMFs use both some existing ownership advantages that form the bases of initial competitive advantages and then pursue the acquisition of complementary resources and capabilities required to transfer existing advantages to the overseas markets. It is in sharp contrast to those MNE which want to use the ownership advantages. To be more specific, the asset-exploitation OFDI includes developing overseas markets, escaping from highly competitive mother country, or increasing operational efficiency all over the world. The asset-seeking OFDI consists of acquiring strategic assets to enhance competition capabilities, and also acquiring the supply of raw materials and energy sources in short supply at home. As far as institution-based view concerned, it encompassed both formal and informal institutions, offers a promising way to advance our understanding of the different forms of EMFs'OFDI. This paper also finds that two primary formal institutions, in terms of, bypassing stringent trade barriers of host countries, and home government support impel EMFs going global. The informal institution such as enhancing legitimacy, following social norms, the national interest considerations all prompted the EMFs' foreign investment activities.Moreover, this paper constructed framework basing on different view (institutional view, industrial view, and contract cost theory, resource/capability view) to study the determinants of establishment mode choice of EMFs' OFDI. This paper indicated that variables of country, industry, and firm level have a major effect. First, country level variable, namely culture-psychology distance is positive to M&A. Second, at industry level, industry growth rate is positive to Greenfield, and industry concentration has nonsignificant to establishment mode choice. Third, at firm level, parent's degree of product diversity and international experience are positive to M&A, but asset-specificity is positive to Greenfield.The possible innovations of this post are as follows:First, the contribution was to change the research focus, viz., from MNE to EMFs. Second, this article suggested frameworks integrating several theories to study the OFDI of EMFs, and tested them by empirical research. Eventually, this paper introduced the new institutional economics in research of EMFs' OFDI, and believed that the institutional factors had important influence on foreign investment decision-making.The results of this study have several implications for business practitioners. First, asset-exploitation is also important incentive, but acquiring assets appling OFDI is becoming more and more important. Second, this paper revealed that country-level, industry-level and firm-level factors influenced the establishment mode choice. Managers need also be aware that although maybe there is only one main determinant of investment decision, their optimal decision is made considering different theories including inner resources and external environement. Meanwhile, the establishment mode choice is not isolated, which implies the enterprise's strategic intent and this is the reason why EMFs want to engage OFDI as well. In conclusion, this paer aims to provide guidelines but not desion model for policy makers, managers of emerging markets.