Chinese Companies And Their Internalization: Exploring The Internationalization-performance Link Of China's Most Prominent Enterprises

Current literature on internationalization of firms is primarily concerned with the internationalization of enterprises in the western world. This has proven particularly true of the People's Republic of China (PRC) in the world market; the vast majority of the scientific literature investigates entry of Western companies in the PRC, while little attention has been given to the accelerating internationalization of Chinese enterprises. This paper analyzes the factors associated with going global for these new world competitors. Specifically, it measures the levels of internationalization of Chinese companies and determines whether there is a direct link with their financial performance. Particularly, I shed some empiricallight on the degrees to which five major Chinese MNCs have internationalized their activities in the past 10 years. I tested the S-shaped internationalization-performance hypothesis among these companies in the international-performance relationship. The results show that Chinese MNCs have undergone rapid international expansion in the past years. The study did find strong evidence of strong correlations between various stages of internationalization and financial performance. That is in the first stage when Chinese companies begin internationalizing there is a strong negative correlation between these two variables. Subsequently, at the stage 2, Chinese companies continue expanding abroad while their financial performance increases. However—and ultimately—I had to reject the S-curve internationalization-performance hypothesis, as only the first two stages of the relationships have been confirmed. Therefore, Chinese companies' internationalization-performance link forms a U-curve shape. This is a clear indication that Chinese companies have not over-internationalized yet. All in all, I proved that Chinese companies, for the first two stages of internalization, follow a regular trend similar to other companies studied around the world. To summarize, in this work I introduced the S-curve hypothesis and showed the fundamental reasons why the relationships between performance and internationalization takes place.Then, I introduced five Chinese companies that by many means are the representative of China's internationalizing companies. At the end, I run the Spearman's rank correlation coefficient as well as Ordinary Least Square Regression in which I found relatively significant correlations and dependence among the two studied variables. At the end, I come up with a few suggestions for possible future research as my thesis is just the beginning of research on internationalization of Chinese companies.