Internationalization Of Chinese Commercial Banks: Perspectives From Learning Effects

Based on the viewpoints of emerging MNCs theory, this study carded thetheoretical foundation and action mechanism of the international learning effect inChinese banking industry. Focusing on the theme of "international learning effect",several therotic models were derived to test the learning effects of experience on theinternationalization process and locational selection behavior of Chinese commercialbanks. By highlighting such variables as "learning motivation","internationalexperience" and "experimental learning" in the conceptual models, this studydifferentiated itself from the traditional OLI paradigm. Following the logic frommacro to micro perspective, three sub projects, guided by Learning Rationale, weredesigned to analyze the internationalization issuses of Chinese banking industry.Project One analyzed two pathways and mechanisms of international learningchannels in the process of outward internationalization of Chinese banking industry.The empirical results indicated that both inward and outward internationalizationexperience had positive effects on the bank internationalization process. However, thegeneral experience deriving from the opening-up policy of the banking industry hadstronger effect than that from its overseas operation. This may attribute to the shortoutward internationalization course of the banking industry during which the learningeffects had not been released in full. As to the results tested from the bank-level, theco-efficient between the outward internationalization experience and the degree ofinternationalization in BOC was higher than that of the whole industry. And theco-efficient of ICBC was much lower than that of BOC, followed was CBC. Itdemonstrated the release of a bank’s learning effects was time-related.Project Two made a systematic analysis of the determinants of the bank locationselection from the perspective of learning-orientation motivation. It sugggested thatamong three motivations, learning motivation had the strongest effect on the locationselection of Chinese banking industry, followed by market-seeking motivation, andclient-following motivation had the minimum impact on bank’s oversea expansion. Inaddition, this study demonstrated the cultural and economic proximity of host-homecountries positively influencing the number of overseas branches in this host country,which justified Equential Entry Perspective could explain the internationalizationbehavior of Chinese banking industry much better than the OLI paradigm. Based on Oligopoly Reaction Theory, Project Three examined the learningbehavior from the bank-level perspective. It demonstrated the imitation of the leaderwas one of the main ways to realize organization learning in global operation context.Moreover, the oligopoly reaction was occurred most obviously in ICBC, followed byCBC. It could be conclude that the longer the internationalization history the bank had,the more noticeable the oligopoly reaction was. However, owing to a much shorterinternationalization history and, the oligopoly reaction in other3sample banks couldnot be tested. This study verified the opinion of Tan&Meyer (2011), who declareboth industry FDI agglomeration and country-of-origin agglomeration provided aneffective channel for sharing of sensitive and tacit knowledge about local businessenvironments. It’s also an effective way for Chinese commercial banks to follow theearly internationlizer to share the country-specific experience.In point of the effect of international experience to bank entry mode selection, itshowed that the accumulation of international experience encouraged the bank to takea higher involvement entry mode. Nonetheless, compared with the variable ofoligopolic reaction, the regression coefficient of international experience was muchlower, and the effect of specific experience was not yet been verified in this study.This could partly attribute to lag effect of international experience, or the parentsbanks preferring the specific entry mode of branches.As to the regression results of the control variables, it indicated that only threehypothesis were verified, namely, the effect of the institutional environment and thegovernmence level of the host country, as well as the institutional quality of homecountry. However, none of the proxy variables of the bank ownership advantages wassupported to have any effect on the bank internationalization degree or behaviors.This may owing to the lag effect of banking reform policy, or the political drives inthe bank internationalization. It furthermore demonstrated the EMNCs theory hadmore explanatory power than traditional eclectic theory on the internationalizationbehavior of Chinese Banking industry. It could be concluded that ownershipadvantage was not essential for EMNCs global expansion.The theoretical significance of this study lied in that by transcening thetraditional OLI paradigm (also called the eclectic paradigm), it highlighted thosevariables of "learning-orientation motivation","international experience","international learning", and "institutional variables" in the conceptual model. Bydemonstrating Learning Rational could better explain the international issuses ofChinese banking industry, this study contributed to the deepening of the research on EMNCs.The realistic enlightenment of this study lies as following:Firstly, It justifies both the “open-up” and “go-global” policy had positive effecton Chinese banking international process. By introducing FSI into the bankingindustry, we obtained inward internationalization experience, which helps the bank toestablish international links to acquire knowledge spillover effects and accesscountry-specific knowledge. The ODI process of Chinese MNCs offeres a pullingforce to the internationalization of banking sector.Secondly, following the industry peer to enter overseas markets and co-locatedwith early internationalizers, is other kinds of effective strategies for bankinternational expansion and provides an experience sharing channel for lateinternationalizers in a specific market.Thirdly, the bank should differentiate its entry modes in responding to differentFDI motivations and relative advantages/disadvantages it poses. It may try subsidiaryentry mode when entering into market where the bank has the monopoly advantagesor cultural differences is lower. However, when the bank FDI is learning-orientated,the entry mode should help to access to strategic assets and realize knowledgelearning effect. In a highly developed and competitive market, the bank should try toavoid to exists in the form of subsidiary. If the bank FDI is market-seek type, it shouldassess whether the bank has enough ownership advantages on this market. If not, it isnot suitable for taking the auxiliary mode.