Foreign direct investment in the knowledge-intensive manufacturing industry constitutes the key to industrial upgrading and economic restructuring in China. Present studies on foreign direct investment are still limited in regard to understanding their specific investment behaviors. Entry mode is the key strategy of foreign firms which determines their success in the host countries. Regions, as the basic spatial units with specific economic, social and cultural character, affect the entry mode of foreign firms to a great extent. This paper aims to reveal the geographical mechanism of the entry mode of FDI in the knowledge-intensive manufacturing sector, which advances the understanding of the exogenous-driven mechanism of urban and regional development within the context of economic restructuring in China nowadays. The theoretical framework of this paper proposes two fundamental locational factors influencing the choice of entry mode into the Chinese market: regional institutional environment and regional absorptive capacity. On the one hand, regional institutional environment is expected to influence the transaction cost of doing business in the host countries, in particular within the context of transition economies. When the regional institutional environment is better off, the knowledge-intensive firms tend to choose the wholly-owned entry mode to safeguard the interests of their own technology and reduce the risks of being rapidly imitated by local actors without costs. On the other hand, regional absorptive capacity enhances the willingness of foreign firms to form joint ventures with local firms in order to tap into the local knowledge pool. In regions with low absorptive capacity, foreign investment tends to constrain the scope of knowledge exchange within communities of foreign firms, and show limited willingness to cooperate and interact with local firms. Using the database of German knowledge-intensive FDI in China from 1982 to 2014, the analysis shows that the German FDI has been concentrated in the coastal areas of China. Spatio-temporal statistical analysis demonstrates that the location of German FDI has been spreading from coastal to inland provinces. In coastal provinces, it has been spreading from the central to the peripherial cities. Since 1995, the entry mode of German knowledge-intensive FDI has been shifting from joint ventures to wholly-owned mode. The logit model results further show that the entry mode of German FDI in knowledge-intensive sector is driven by multiple locational factors. On one hand, the decision of FDI firms to take joint ventures as the entry mode in the host country is influenced by the level of urban human capital and the degrees of industrial specialization. This implies that regional knowledge absorptive capacity is essential to the formation of local-global strategic coupling. On the other hand, the FDI stock and the number of authorized patents in the city significantly encourage the entry mode decision of a wholly-owned FDI firm, because the knowledge-intensive firms’ core competence lies in technology. These firms are most concerned about the issues on intellectual right protection. As a result, the regional institutional environment is an important locational determinant for the knowledge-intensive FDI firms.
Number of obs= 741 Prob>chi2 =0.0000 LR chi2(15) = 123.57 Log likelihood = -374.91
Tab. 3 德企投资进入方式的逻辑回归模型
UNCTAD. World Investment Report 2015: Reforming international investment governance. , 2015.http://www.environmentportal.in/content/413593/world-investment-report-2015-reforming-international-investment-governance/
This year’s World Investment Report, the 25th in the series, aims to inform global debates on the future of the international policy environment for cross-border investment. Following recent lackluster growth in the global economy, this year’s Report shows that Foreign Direct Investment (FDI) inflows in 2014 declined 16 per cent to $1.2 trillion. However, recovery is in sight in 2015 and beyond. FDI flows today account for more than 40 per cent of external development finance to developing and transition economies. The World Investment Report tackles the key challenges in international investment protection and promotion, including the right to regulate, investor-state dispute settlement, and investor responsibility. Furthermore, it examines the fiscal treatment of international investment, including contributions of multinational corporations in developing countries, fiscal leakage through tax avoidance, and the role of offshore investment links.
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For a young, resource-constrained, technology-based start-up embarking on international sales, the choice of entry mode is a strategic decision of major importance. Yet within the emerging research stream of international entrepreneurship, curiously little attention has been devoted to the empirical analysis of foreign market entry forms. The authors address this important issue by analyzing the determinants of 398 export decisions taken from a U.K. survey of 246 technology-based start-ups with international activities. The findings show that the entry mode decision is necessarily a trade-off between the resources available and the support requirements of the customer. Issues of the innovativeness of the technology and the historic channel experience of the firm in its domestic market are particularly strong determinants of mode choice. The authors suggest that an organizational capability perspective on these firms' behavior offers a better explanation of their entry decisions than either transaction cost or stage theory.
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The objective of this study was to explore the linkages between the overall business strategies of small firms and their patterns, processes and pace of internationalization. A qualitative approach was adopted, involving 30 indepth interviews with key decision makers of internationalizing small firms based in 3 UK regions (15 ‘knowledge-intensive’ and 15 ‘traditional’ firms). The findings suggest that business policies, including those linked to ownership and/or management changes, had an important influence upon the international orientation of many firms. There were close relationships between product policies and market focus, with product or process innovation often providing an important stimulus to international expansion. However, differences existed in the patterns, processes and pace of internationalization between small ‘knowledge-intensive’ and ‘traditional’ manufacturing firms. The implications of these results on firm strategy, public policy and theory development are discussed and a series of research questions are postulated for future investigation.
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Abstract The choice of entry mode into a foreign market has a major impact on the success of a firm's international operations. However, the existing literature on the entry mode decision has either presented a list of considerations without identifying underlying constructs, or treated each entry decision in isolation. Here, a unifying framework is developed. This framework identifies three underlying constructs that influence the entry mode decision. These constructs are linked to considerations that have been previously discussed in the literature. It is argued that a firm's choice of entry mode depends on the strategic relationship the firm envisages between operations in different countries. A particular entry decision cannot be viewed in isolation. It must be considered in relation to the overall strategic posture of the firm. Further, the paper argues that different variables often suggest different entry modes, and that resolving these differences involves accepting trade-offs.
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In this study, we bridge two streams of foreign direct investment literature, specifically studies on establishment mode choice (i.e., the choice between an acquisition and a greenfield establishment) and studies on entry mode choice (i.e., the choice between a wholly owned outlet and a subsidiary with shared ownership). We arrive at a conceptual synthesis for an examination of the effects of the same predictors on the dual entry-establishment mode choice made in the context of a single foreign investment. We demonstrate that a parent firm's technological intensity, international strategy and experience determine both establishment and entry mode choices. Moreover, we apply Williamson's new institutional economics to investigate the influence of institution building on multinational enterprises' dual investment choice. In the context of transition economies, we test empirically the possible moderating effect of a host country's institutional environment. We conclude that the degree of the host country's institutional advancement moderates the effect of both technological intensity and international strategy on the establishment and entry mode choice.
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This paper examines the impact of knowledge tacitness on a firm's propensity to establish plants in foreign rather than domestic locations. Our predictions build on knowledge-based, internalization, and evolutionary theories of foreign direct investment. We argue that the tacitness of technology has an inverted-U effect on the propensity to undertake foreign investment. We also expect that as a firm learns about a technology, it will become more likely to make foreign investments. We examine two forms of learning: that which accumulates as a function of the number of plants previously built by the firm (transfer-based learning), and that which accumulates as a function of time since the firm started using a technology (time-based learning). We investigate empirical effects in a sample of investments in the memory segment of the semiconductor industry. Our predictions about the curvilinear effect of tacitness are supported. The results also suggest that learning is a matter of taking time to become acquainted with the use of the technology, and of gaining experience through successive foreign plant investments. The study adds to the understanding of the effects of knowledge on corporate expansion.
Wei Y HD. Beyond new regionalism, beyond global production networks: Remaking the Sunan model, China. , 2010, 28(1): 72-96.http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1757254
ABSTRACT I attempt to advance the research on globalization and regional development in China through a study of Kunshan City. I investigate the restructuring process, the structure of foreign direct investment, and the nature of global – local networks to understand trajectories and models of regional development in the context of globalization. I highlight the interactions of the Chinese state, transnational corporations (TNCs), and regional assets in shaping the trajectories of regional development. I argue that Kunshan’s pathway to globalizing regional development is state centered and heavily dependent on global forces, which has made Kunshan a TNC satellite district and a dual city segmented between TNCs and domestic firms. I also argue that TNCs’ local embeddedness has to be positioned in their global and external networks and that the assessment of regional development has to be conditioned upon a region’s specific context. The findings suggest that neither new regionalism nor global production network perspectives can fully explain regional development in China with huge domestic markets and large regional disparities. I promote an alternative, middle-ground perspective to regional development to better integrate global forces, state institutions, and local contexts. Such a third approach to regional development has the potential to localize TNCs and to develop indigenous capacities.
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The purpose of this paper is to investigate the systematic forces that determine the sectoral distribution of foreign investment. Unlike the existing literature, this study highlights the importance of industrial agglomeration and industrial linkage in attracting foreign investment. Using a panel dataset of two-digit manufacturing industries in Beijing during the period 1999-2004, this study finds that geographically agglomerated industries with strong intra-industrial linkages attract much foreign investment. Previous foreign investments have demonstration effects, information spillover effects and linkage effects, leading to industrial concentration of foreign investment. Investors also highly favor capital and technology intensive industries and are drawn to the most profitable and exporting industries, but avoid industries with high effective wage rates and high entry barriers. This study provides strong evidence to support that competitive and comparative advantages of local industries are critical to allure foreign investment. The existence of industrial clusters certainly heightens a city's attractiveness to foreign investment.
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The choice of a mode of market entry is a critical component of the internationalization strategy, and numerous empirical studies have focused on this topic. Prior research, however, has provided mixed empirical evidence and thus, is difficult to interpret and review. This study examines the external antecedents of the choice of entry mode by meta-analyzing data from 72 independent primary studies. We focus on the decision between wholly owned subsidiaries and cooperative entry modes. For each variable, hypotheses about the theoretically expected direction of effect are posited and tested. We find a strong positive relationship between power distance as a cultural trait of the firm's home country and the propensity to establish a wholly owned subsidiary. On the other hand, we find a negative association between country risk, legal restrictions, market growth, and market size and the preference for wholly owned subsidiaries. We extensively discuss the implications of the meta-analytical results and investigate moderating effects of industry type and the time of the study. The relationship between income level of the host country and entry mode depends, to some degree, on the industry type. Service companies exhibit a negative relationship between income level and wholly owned subsidiaries, while manufacturing companies show a positive relationship.
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While existing literature examined the impact of intellectual property protection on the volume of foreign direct investment (FDI), little is known about its effect on the composition of FDI inflows. This paper addresses this question empirically using a unique firm-level data set from Eastern Europe and the former Soviet Union. It finds that weak protection deters foreign investors in technology-intensive sectors that rely heavily on intellectual property rights. Moreover, the results indicate that a weak intellectual property regime encourages investors to undertake projects focusing on distribution rather than local production.