| Recently, the Chinese government has taken a more liberal approach towards foreign direct investment (FDI) along with which China has been emerging as one of the most important FDI export countries in the developing world besides she has been always been regarded as one of the largest FDI recipient countries in the world since the1990s. Meanwhile, the Arab countries have been also gaining attentions around the world for business and investment let alone oil or natural resource. So how is the situation of the Chinese FDI in the Arab world? Which kind of entry mode is more preferred by the Chinese firms? What factors do they take into consideration when making decision? And what suggestions or lessons are indicated for the firms in their future experience?Mainly motivated by the above mentioned questions, this study examines, from management perspectives, the entry mode of Chinese FDI into the Arab world. As modern Arab is not so much popular in the academic research on economy in China, this thesis started by generally presenting the Sino-Arab relation and summarized its characteristics. Based on this background, it extracted the essential determinants in making FDI outwards option, such as product diversification, international experience, culture, market attractiveness and et al. Then to apply those determinants, some related theories were reviewed and introduced including internationalization model; transaction cost approach as well as real option theory.Following it, a real case study of Chinese FDI into the Arab world was conducted by taking Huawei as an example. The foreign entry modes used by Huawei in different market were compared and the evolution of its entry mode into the Arab world was summarized. Finally, the factors that influence the FDI of Huawei into the Arab world were extracted and discussed. Given the huge scale of this topic, to be more purposively and feasibly, the empirical research of this thesis was organized in the forms of three in-depth models treating three different contexts assumed according to the unique features of the Arab world combined with Chinese outward FDI features. Taking into consideration the wide scope of foreign direct investment, the objective of the paper is to identify Chinese enterprise foreign direct investment models and principal influencing factors specific to the Arab World. The methodology used for analysis is categorizing influencing factors into micro-meso-macro levels. Micro factors are enterprise strategic targets and selection of geographic locations. Macro factors are country risk, differences in culture and language, and other environmental influences. Meso factors are market competition. This paper will construct three models to analyze the micro-meso-macro factors.Model I investigated the relationships between firm heterogeneity and location choice and between firm heterogeneity and ownership choice. By adopting the conditional logistic regression method, it was found that firms with more controlling of state equity are more responsive to favorable exchange rate between Chinese RMB and the host currency and firms with TFP increased increase affiliate ownership accordingly. Model II examined FDI entry mode option under uncertainties of country risk, cultural distance and language diversity. Based on real option theory, it pointed out to a preference for JVs over WOSs when the FDI’s environment is characterized by both high political risk and cultural distance. Model III applied a game theory to explore the behavior of firms when confronting uncertainty from its competitor. Also by exercising real option, the probability of entry into a foreign market was derived using a mixed strategy equilibrium concept.After a thorough analysis of Chinese enterprise foreign direct investment modes of entry and system of influencing factors in the Arab World, the paper attempts to use the following innovative solutions:(1) study of Arabic countries’foreign direct investment activity and identify investment modes of entry and system of influencing factors, as a basis to further develop Chinese foreign direct investment strategic theory and practice of attracting investment, identify modes of entry, and enrich research results;(2) through system of influencing factors empirical analysis, the paper uses micro-meso-macro level analysis to structure a comprehensive results based framework, based on company specific factors, competitive behavior, and macro-economic variables;(3) empirical analysis is based on existing research, case studies, and informal interviews with members of traditional enterprise management discussing evaluation criteria used to determine modes of entry and the level of influences. Through interviews, the paper has identified enlightening experiences that can be used in future practice of Chinese enterprises and provide countermeasures and suggestions. Certainly, this research has some limitations, for an example the data used in the research.One of the most important contributions of this study is that it is conducted based upon the responses from informally interviewing managers about the direction and degree of influence that various criteria have on their choice of mode. As well as providing empirical support for the special issue related to Chinese FDI entering the Arab world, new insights were gained about the inter-related roles of resources and firms’ preferences in determining the choice of entry mode. The limitations of the study lie in the utilized data. Due to the relatively short period of and incomplete written official statistics of the Arab inward FDI from China, to improve the reliability of the empirical results, other countries’related information are also referred to as a comparison source. Thus the obtained indications when put in use, should be attached more concern. |
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