Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-10T15:36:59.317Z Has data issue: false hasContentIssue false
  • English
  • Français

Which Way through the Open Door? Reflections on the Internationalization of Chinese Firms

Published online by Cambridge University Press:  02 February 2015

Max Boisot  and
Marshall W. Meyer
Max Boisot
Affiliation:
University of Birmingham, UK
Marshall W. Meyer
Affiliation:
University of Pennsylvania, USA
Get access Rights & Permissions [Opens in a new window]

Abstract

Received internationalization theory argues that firms occupy domestic space before going abroad; in other words, large, oligopolistic firms are most likely to internationalize. The experience of China, whose economy is fragmented and whose firms are small by global standards, suggests otherwise. We construct a model of small firm internationalization driven by the relative transaction costs of crossing domestic (in the case of China, provincial) and international borders. When the costs of crossing domestic borders exceed the costs of crossing international borders, firms will internationalize at a relatively early stage of development. In the case of China, local protectionism and inefficient domestic logistics increase the costs of doing business domestically; moreover, protection of property rights in the West and the advantages afforded Chinese owned firms reconstituted as foreign entities operating in China decrease the costs of ‘going out’. We coin the term ‘institutional arbitrage’ to capture Chinese firms' pursuit of efficient institutions outside of China. We argue that strategic exit from the home country rather than strategic entry into foreign markets may explain the internationalization of many Chinese firms.

Keywords

arbitrageChinese economic reformsChinese firmsinternationalizationoffshoring中国企业国际化中国经济改革套利海外经营
Type
Perspective
Information
Management and Organization Review , Volume 4 , Issue 3 , November 2008 , pp. 349 - 365
Copyright
Copyright © International Association for Chinese Management Research 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ansoff, I. 1965. Corporate strategy: An analytical approach to business policy for growth and expansion. Middlesex: Penguin Books.Google Scholar
ApplianceMagazine.com. 2005. Whirlpool, Maytag sign definitive merger agreement. August 22. [Cited 8 April 2008.] Available from URL: http://www.appliancemagazine.com/news.php?article=9053&zone=0&first=1Google Scholar
Arrow, K. 1969. The organization of economic activity: Issues pertinent to the choice of market vs. nonmarket allocation. In The analysis and evaluation of public expenditures: The PBB System, 1: 59–73. U.S. Joint Economic Committee, 91st Session. Washington, DC: U.S. Government Printing Office.Google Scholar
Barringer, B., & Greening, D. 1998. Small business growth through geographical expansion: A comparative case study. Journal of Business Venturing, 13: 467–492.Google Scholar
Birkinshaw, J., & Hood, N. 1998. Multinational subsidiary evolution: Capability and charter change in foreign-owned subsidiary companies. The Academy of Management Review, 23: 773–795.CrossRefGoogle Scholar
Boisot, M., & Child, J. 1988. The iron law of fiefs: Bureaucratic failure and the problem of governance in the Chinese economic reforms. Administrative Science Quarterly, 33: 507–527.CrossRefGoogle Scholar
Brainard, L., & Fenby, J. 2007. Chinese takeout. Wall Street Journal, February (20).[Cited 8 May 2008.] Available from URL: http://online.wsj.com/article/SB117193824398613232.htmlGoogle Scholar
Caves, R. 1982. Multinational enterprise and economic analysis. Cambridge: Cambridge University Press.Google Scholar
Child, J., & Rodrigues, S. B. 2005. The internationalization of Chinese firms: A case for theoretical extension? Management and Organization Review, 1: 381–410.CrossRefGoogle Scholar
China Economic Review. 2007. Do not pass go. [Cited 8 April 2008.] Available from URL: http://www.chinaeconomicreview.com/cer/info/Do_not_pass_go.htmlGoogle Scholar
Coasc, R. 1937. The nature of the firm. Economica, New Series, 4: 386–405.Google Scholar
Dore, R. 1973. British factory–Japanese factory: The origins of national diversity in industrial relations. Berkeley: The University of California Press.Google Scholar
Dougherty, S. M., & McGuckin, R. H. 2008. The effects of federalism on productivity in Chinese firms. Management and Organization Review, 4: 39–61.Google Scholar
Drewry Shipping Consultants Limited. 2007. Spotlight report: Opportunities in China's container transport and logistic sectors. London, UK: Drewry Publishing. [Cited 8 May 2008.] Report brochure available from URL: www.drewry.co.uk/get_file.php?id=999Google Scholar
Dunning, J. 1980. Toward an eclectic theory of international production: Some empirical tests. Journal of International Business Studies, 11: 30–64.CrossRefGoogle Scholar
Dunning, J. 1988. The eclectic paradigm of international production: A restatement and some possible extensions. Journal of International Business Studies, 19: 1–31.CrossRefGoogle Scholar
Economist Intelligence Unit. 2005. Economic policy: Five year plans: An exercise in strategic planning. Country Report: China, Dec: 18–19.Google Scholar
Erdener, C., & Shapiro, D. M. 2005. The internationalization of Chinese family enterprises and Dunning's eclectic MNE paradigm. Management and Organization Review, 1: 411–436.CrossRefGoogle Scholar
Fox, E. 2008. An Anti-Monopoly Law for China – Scaling the Walls of Government Restraints. Antitrust Law Journal, 75: 173–194.Google Scholar
Garelli, S. 2003. IMD World Competitiveness Yearbook. June. Lausanne: IMD.Google Scholar
Geringer, M., Beamish, P., & Costa, R. 1989. Diversification strategy and internationalization: Implications for MNE performance. Strategic Management Journal, 10: 109–119.CrossRefGoogle Scholar
Hindu Business Line. 2004. Manufacturers should leave logistics to service providers. Nov. 20. [Cited 8 April 2008.] Available from URL: http://www.thehindubusinessline.com/bline/2004/11/20/stories/2004112001830200.htmGoogle Scholar
Hindu Business Line. 2007. Logistics providers must innovate to retain their edge. [Cited 8 April 2008.] Available from URL: http://www.thehindubusinessline.com/bline/2007/10/01/stories/2007100150690600.htmGoogle Scholar
Hirschman, A. 1970. Exit, voice, and loyalty: Responses to decline in firms, organizations, and states. Cambridge, MA: Harvard University Press.Google Scholar
Holz, C. 2006. Revisions to China's GDP data following the 2004 economic census: More questions than answers? Hong Kong: Social Science Pre-print, Hong Kong University of Science and Technology. [Last accessed 8 April 2008.] Available from URL: http://hdl.handle.net/1783.1/2525Google Scholar
Huang, Y. 2003. Selling China: Foreign direct investment during the reform era. Cambridge: Cambridge University Press.Google Scholar
Huang, Y. Forthcoming. Capitalism with Chinese characteristics: Entrepreneurship and state during the reform era. Cambridge: Cambridge University Press.Google Scholar
Hymer, S. 1976. The international operations of national firms: A study of direct foreign investment. Cambridge, MA: MIT Press.Google Scholar
Johanson, J., & Vahlne, J. 1990. The mechanism of internationalization. International Marketing Review, 7(4): 11–24.Google Scholar
Kindleberger, C. 1984. Multinational excursions. Cambridge, MA: MIT Press.Google Scholar
Knickerbocker, F. T. 1973. Oligopolistic reaction and multinational enterprise. Boston: Harvard Business School.CrossRefGoogle Scholar
Liu, M., & Tao, R. 2004. Regional yardstick competition, fiscal reform and local governance reform in China. Paper presented at the Insititute for Chinese Studies conference on Paying for Progress: Public finance, Human Welfare, and Inequality in China, Oxford University, May 21–23, 2004.Google Scholar
Lu, J., & Beamish, P. 2001. The internationalization and performance of SMEs. Strategic Management Journal, 22: 565–586.Google Scholar
Meilin, L. 1992. Internationalization as a Strategy Process. Strategic Management Journal, 13: 99–118.CrossRefGoogle Scholar
Meyer, M. W., Lu, Y., Lan, H., & Lu, X. 2002. Decentralized enterprise reform: Notes on the transformation of Chinese State-Owned Enterprises. In Tsui, A. S. & Lau, C. M. (Eds.), The management of enterprises in the People's Republic of China: 241–273. New York: Kluwer Plenum Academic Press.Google Scholar
Meyer, M. W., & Lu, X. 2005. Managing indefinite boundaries: The strategy and structure of a Chinese business firm. Management and Organization Review, 1: 57–86.CrossRefGoogle Scholar
Oviatt, B., & McDougall, P. 1994. Toward a theory of international new ventures. Journal of International Business Studies, 25: 45–64.Google Scholar
Oviatt, B., & McDougall, P. 1999. A framework for understanding accelerated international entrepreneurship. In Rugman, A. & Wright, R. (Eds.), Research in global strategic management: International entrepreneurship: 23–40. Stamford, CT: JAI Press.Google Scholar
Penrose, E. 1959. The theory of the growth of the firm. Oxford: Oxford University Press.Google Scholar
Silverman, B. 1999. Technological resources and the direction of corporate diversification: Toward an integration of the resource-based view and transaction cost economics. Management Science, 45: 1109–1124.Google Scholar
State Council Information Office. 2007. SAIC Deputy Director Li Dongsheng: Development of trademark administrative protection in China. [Cited 8 May 2008.] Available from URL: http://english.ipr.gov.cn/ipr/en/info/Article.jsp?a_no=85024&col_no=276&dir=200706Google Scholar
Stinchcombe, A. 1965. Social structure and organizations. In March, J.. (Ed.), Handbook of organizations: 142–193. Chicago: Rand McNally.Google Scholar
United Nations Conference on Trade and Development (UNCTAD). 2003. World market for corporate HQs emerging, July 21 (Press Release). Geneva: UNCTAD. [Cited 9 April 2008.] Available from URL: http://www.unctad.org/Templates/Webflyer.asp?docID=3768&intItemID=1634&lang=1.Google Scholar
United Nations Conference on Trade and Development (UNCTAD). 2004. Global Investment Prospects Assessment (GIPA) Research Note 2: Findings of second worldwide UNCTAD survey of investment promotion agencies. Presented in Prospects for FDI flows, TNC strategies and policy developments: 2004–2007 at the Eleventh Session of the United Nations Conference on Trade and Development, Sao Paulo, Brazil, June (2004).[Cited 9 April 2008.] Available from URL: http://www.unctad.org/en/docs/tdxibpd8_en.pdfGoogle Scholar
Vernon, R. 1966. International investment and international trade in the product cycle. Quarterly Journal of Economics, 80: 190–207.CrossRefGoogle Scholar
Wang, L., & Chen, Y. 1984. Economic relations with foreign countries. In Yu, G. (Ed.), China's socialist modernization: 673–718. Beijing: Foreign Languages Press.Google Scholar
Wells, L. 1983. Third world multinationals. Cambridge, MA: MIT Press.Google Scholar
Witt, M., & Lewin, A. 2007. Outward foreign direct investment as escape response to home country institutional constraints. Journal of International Business Studies, 38: 579–594.Google Scholar
Wolff, J., & Pett, T. 2000. Internationalization of small firms: An examination of export competitive patterns, firm size, and export performance. Journal of Small Business Management, 38: 34–47.Google Scholar
Wu, J. 2005. Understanding and interpreting Chinese economic reform. Mason, OH: Thomson Higher Education.Google Scholar
Zhao, H., Luo, Y., & Suh, T. 2004. Transaction cost determinants and ownership-based entry mode choice: A meta-analytical review. Journal of International Business Studies, 35: 524–544.Google Scholar