The internationalisation of Chinese firms: determinants and the influence of dynamic capabilities and institutions on the post-internationalisation performance

This thesis examines the rising phenomenon of the internationalisation of Chinese firms, and aims to shed new light on our understanding of the emergence of firms from emerging economies in the global market. It consists of two parts: the country level study and the firm level. The former identifies the domestic and locational determinants of Chinese outward foreign direct investment (OFDI), while the latter examines the influence of dynamic capabilities and institutions on the post-internationalisation performance of Chinese firms, with a focus on state-owned enterprises (SOEs). To explore the domestic and locational determinants of Chinese OFDI, the thesis integrates network theory with the traditional explanations of OFDI, the investment development path and the eclectic paradigm. By doing so, a new factor, human mobility, is identified as one of the important domestic and locational determinants of Chinese OFDI. Drawing upon a time series data analysis for the period 1979-2007, this study confirms that Chinese OFDI is driven by its domestic economic development, human mobility and knowledge development and accumulation, and it has a substitute relationship with exports. By examining Chinese OFDI flows to 13 OECD countries over the period 1999-2007, it is shown that human mobility, the strategic assets of the host country, foreign direct investment to China and cultural distance have a positive impact on the locational choice of Chinese OFDI to OECD countries. To investigate the influence of dynamic capabilities and institutions on the post-internationalisation performance of Chinese firms, this study integrates the dynamic capability framework and the institution-based view, and embeds the analysis in a multi-perspective conceptual framework. It draws on four case studies of Chinese SOEs. The analysis shows the importance of internal dynamic capabilities in achieving overseas success when dealing with changing environments. The managerial mindset has a moderate effect on the impact of dynamic capabilities on post-internationalisation performance. The case analysis also shows how the external institutional environment of both host and home countries influence the performance of Chinese SOEs. ii Support from both host and home country governments, unsurprisingly, has a positive influence on performance. However, too much intervention from the home country government imposes constraints on the firms and reduces their willingness to commit to internationalisation. This thesis makes a number of contributions to the existing literature. First, it provides a better understanding of the overall picture of Chinese OFDI from the macro perspective. The findings also contribute to our understanding of the rise of OFDI from emerging economies in general and from China in particular. Second, a new factor, human mobility, is identified and proved to be significant in determining Chinese OFDI. In this era of globalisation, human mobility has become the driving force of OFDI from emerging economies. Third, a first step is taken towards exploring the influence of both internal and external factors on the post-internationalisation performance of Chinese firms. In order to achieve overseas success, not only do Chinese firms need to improve their internal dynamic capabilities, but also attention needs to be paid to the external institutional environment, which has a significant impact on the performance of Chinese firms pursuing overseas success.