Research Of The Strategic Motivation And Rationale Of Chinese Firem's Investing In Developed Countries

Contrary to conventional theories which view FDI as an attempt to exploit firm-specific assets abroad, the alternative theories view FDI as an attempt to access and obtain strategic assets which the investor is lacking, but available in a foreign market. According to the asset-seeking perspective, FDI is an efficient way to acquire strategic assets in order to offset the weaknesses of the investor. As a latecomer, Chinese firms are more urgent to conduct asset-seeking FDI in order to catch up with the incumbent global giants. However, there has been a lack of research attention in the area. Following the alternative perspective, this paper intends to address this important research issue by probing the strategic motivations and rationale of Chinese firms' investing to developed countries (DCs) from the microeconomic view, so as to promote practitioner and policy maker to understand the embedded logic of Chinese firms' globalization strategy, help them comprehend the rationale from a more essential and in-depth way.Along with the FDI theoretical research trend, this paper peer-reviews the representative theories of different evolutive phases, focusing on their objects, keystone and essence. Based on the latest research about emerging firm outward-FDI, this paper proposes that it can provide more systematic and holistic understanding of Chinese firm investing to DCs, when investigating from the microeconomic and strategic way. Based on the literature review, this paper probes strategically into China's outward FDI from institutional, transaction costs and resource-based perspectives, and emphasizes the fundamentality of institutional theory. This paper also presents a theoretical framework of Chinese firms' investing to DCs.Based on the theoretical analysis, this paper focuses on two main issues, (1) why do Chinese firms invest in DCs, and (2) how can they do it successfully. The dissertation explores these issues as follows. Firstly, from the strategic perspective, this paper proposes a FDI model which includes market competition, firm's aspiration and absorptive capacities. In the scope of the model, this research makes multiple-case study of four leading Chinese companies (Haier, TCL, BOE, and Lenovo) regarding their investment activities in DCs by using the strategic theories. Within the framework, we argue that asset-seeking FDI is driven by strategic needs that are caused by high competition and aspirating to be global giants and facilitated by strong absorptive capacities.Secondly, this paper theoretically compares four different approaches to acquiring strategic assets: factor markets, cooperation, internal developments and merger and acquisition (M&A). Based on the unique features of strategic assets and practice of Chinese firms', such as Huawei, Zhongxing, Galanz and SAIC we argue that, in the current situation, in order to take part in the global competition, Chinese firms cannot obtain sufficient strategic assets effectively through 'invite in' strategy, such as factor markets and cooperation, but can acquire strategic assets by means of 'go out' strategy, such as cross-border M&A and establishment of R&D centers in advanced host countries.Thirdly, as cross-border M&A is the dominate way of China's outward-FDI, this research investigates the mechanism of value creation and distribution in M&A and identifies three resource-combined models of Chinese firms' merge incumbents based on resource-based theory. The conclusion is that, when a Chinese firm owns more special and complementary resources than other bidders, it can create more extra value and achieve bilateral monopoly in M&A. Under this circumstance, a Chinese firm can not only get needed strategic assets, but also share the extra value with the target firm, thereby achieving a mutually beneficial M&A.After investigateing, finally, the "why" and "how" problems, we propose that in the internationalization environment, acquiring more strategic assets via outward-FDI is the must go for Chinese firms to join the global competition, however, only the firms that own more resource accumulation have the ability to adopt this high risk strategy. In the end, this paper gives the advices, comments and references to the practitioner and policy makers.