Institutional Environment Change And Foreign Direct Investment Inflows In Chinese Cities:From Imprinting Perspective

A number of recent studies have examined how the persistence of social and cultural systems in cities enduringly affects organizations and their strategies and behaviors.Lounsbury(2007)for instance,showed that the strategies followed by mutual funds in Boston and New York systematically differed in ways that reflecting the culture and values of the cities in which they were headquartered.Marquis,Glynn and Davis(2013)found that some US cities have deeply engrained elite cultures that were established centuries ago and endure and affect contemporary support of local nonprofits.And Greve and Rao(2012)showed that early founding of nonprofit organizations in Norwegian cities imprinted these cities with of civic commitment,which now results in these communities currently establishing new nonprofits.However,this research has mainly examined how initial conditions affects focal entity's activities and performance in a single subsequent period,little attention has been paid to how subsequent historical changes strengthen or erode the initial imprinting effect.The fundamental point of this research is that local cultural and social systems endure which leads to variation in organizational behaviors,within countries and across the globe.I examine how variations in historical and institutional systems over the past century of Chinese history have affected the FDI inflows of Chinese cities and the firms that reside in them.Besides,this study also responds to the call by Marquis and Tilcsik(2013)to expand the scope of imprinting research by considering the effects of multiple "sensitive periods" that reflect the ebbs and flows of macro political,institutional and economic changes on organizational behaviors.Such a focus can advance our understanding of the processes and mechanisms underlying imprinting persistence and decay by showing how deliberate political forces and economic changes may alter and restore imprinting effects.Although many studies have demonstrated that firms attempt to modify imprinted features in a subsequent period(Boeker,1989;Marquis and Huang,2010),we know less about how the multiple political,institutional and economic transitions affect imprinted business activities over time.In a context whereby multiple historical changes have taken place,can the early imprinting feature be offset by political,institutional and economic transitions that undermine the original imprint?Can the original imprint be reactivated in a later stage for contemporary utility(Kozhikode,2015;Marquis and Huang,2010)?If so,what are the reactivation mechanisms?In this study,I identify three major periods in Chinese history that have affected inward FDI and international business activities.The first era features the Treaty Port System,which lasted from 1842 to 1911.In this period,the Qing dynasty government ended its earlier seclusion policy and opened its door to foreign business,providing privileges for trade and business activities.During this period,Chinese living in port cities gradually developed international business awareness.They started to cooperate with foreign investors and go abroad to explore business opportunities.The second era(1966-1976)is the Cultural Revolutionthat threw China into turmoil and broke down the domestic economic system.The third era(1978-201 1)is the reform and opening-up policy period that encouraged and facilitated FDI and international business activities.This paper was to develop an understanding of the imprinting effect of early internationalization exposure over the past century of Chinese history on the contemporary foreign expansion of Chinese cities and firms that reside in them.Theoretically,this situation allows us to examine two areas of interest in the imprinting literature,first,how non-founding sensitive periods affect social systems and,second how imprints stand-up when there are significant countervailing pressure to reduce the imprint.Specifically,I examine how early internationalization and foreign trade experience at the city-level imprinted different Chinese cities with varying levels of foreign experience and acceptance which left a lingering set of institutions,culture and networks that could be "re-awoken" later,after market liberalization in 1978.In this study,I undercover two commercial imprinting effects:the treaty ports policy imprint and ethnic Chinese culture imprint.By treaty ports policy imprint,I refer to the historical legacy left by the formal rules-specifically the Treaty Ports policy on the subsequent international business activities.This focus on the treaty ports policy imprint is useful to understand how ports exposed cities to an early internationalization process that conditioned their resources and affected subsequent FDI activities,despite major political and economic turmoil in intervening years.By ethnic Chinese culture imprint,I refer to the lingering effect of community culture and networks that early ethnic Chinese established and later become institutionalized and inherited by subsequent generations over time.This informal institution serves as a bridging mechanism for activating international business links and facilitates FDI flows despite the fact that subsequent political turmoil broke down business activities.This paper makes following contributions.First,by tracing effects of multiple political and economic shifts,I show a process of how layers of history are deposited in cities and subsequently become influential for business activities,illustrating imprinting persistence,decay,and reactivation processes.Second,I demonstrate powerful imprinting effect of a community in producing collective knowledge,trust,and business routines that can sustain business activities despite macro political turbulence.This finding is akin to the idea of "second-hand imprinting"(Tilcsik,2013)in that the younger ethnic Chinese generations in these locations emulated the elder generations,inherited their community business culture.The new imprint is layered upon the existing imprint,contributing to the current unbalanced FDI distribution.Third,this paper also contributes to the recent call for an "historical turn" in organizational studies(Kipping and Usdiken,2014;Rowlinson,Hassard,and Decker,2014),especially as it relates to the international business literature where history,time,and space have been marginalized(Jones and Khanna,2006).