The Internationalization Of Smes Operating In China Market Entry Mode

With the world's economy integration and China's entry into WTO, more and more Chinese enterprises go abroad to establish their business. Many big multinational corporations have therefore received a lot of attention. Although a large number of small-and-medium enterprises (SME) have also made foreign direct investment, they are not given much attention they deserve for their limited investment volume. Actually, SMEs are enjoying unique advantages in FDI because of their technology and their products. Taking China's strategic purpose of FDI, the characteristics of China's enterprises and their experience of transnational operation into account, we find that SMEs are the principal part of FDI in current period. Among the key factors determining MNE's success in international competition, proper entry mode choice is of great importance. Thus, this paper first makes a comparison between various entry modes; then, it gives an analysis on the variables affecting the entry mode choice. Based on transaction cost theory, organizational capability theory and eclectic theory, the paper attempts to work out a synthetic decision-making model for entry mode choice. Combining the model with Chinese SME's advantages and disadvantages, this paper advise that joint venture is the mode suitable for Chinese SME's FDI. At last, this paper makes an empirical study on the correlation of Chinese SME's entry mode choice and firm performance. The result shows that there is obvious correlation between SME's entry mode choice and firm performance. Joint-ventures are performing better than wholly-owned subsidiaries.