This article examines how and why renowned Republican-era Chinese firms raised debt capital to finance their businesses by accepting savings deposits from ordinary people instead of borrowing from financial institutions. The article argues that in the absence of a powerful unitary state and centralized financial institutions, Chinese firms innovated sophisticated, decentralized financial instruments capable of amassing large quantities of capital from a broad host of depositors without the involvement of financial intermediaries. Savings deposits not only provided these firms with a cheaper and more flexible source of debt capital than that on offer from banks but also they fueled the Chinese economy by creating a sizable credit supply, a phenomenon that Chinese business and financial history scholarship focusing on the role of indigenous and modern banks has hitherto largely neglected.

The ownership structure of Chinese firms has experienced significant changes over the last three decades, including the development of a fast growing stock market through which a large number of domestic firms have become publicly traded corporations. These changes have drawn increasing attention from researchers of corporate governance. In this article, we review the empirical research on corporate governance in China, with a focus on the internal and external governance mechanisms that have been investigated and the findings about the effectiveness of these mechanisms. On the basis of our review of 132 studies, we summarize the major findings and discuss the limitation of agency theory in understanding the governance issue in Chinese firms. We offer several ideas (e.g., the importance of the social context, new conceptualization of governance, different outcomes of governance, and data/method issues) for a new agenda to guide future research in the corporate governance of firms operating in the Chinese and other emerging economy contexts.

Child and Marinova’s (2014) framework provides an important conceptual tool to analyze the globalization of Chinese firms by highlighting the Chinese context and the context of the host country. Their framework is defined by two dimensions: political stability and institutional maturity, which needs to be augmented by a cultural dimension. To illustrate this argument, I review the importance of a broadened notion of cultural distance, intercultural competence, and intergroup dynamics in shaping the learning and adaptation, and eventual success of Chinese expatriates and firms in their global expansion. There is a severe lack of research on the culture-related issues confronting Chinese global firms, a priority area for future research.

Research on the globalization of Chinese and other emerging markets' companies has only just begun and is on the verge of taking off. As it does so, additional thought should be given to the ontological and epistemological underpinnings of the theories attempting to capture the phenomenon. Should Western-centric theory prevail? Be adapted? Or abandoned in favour of new indigenous approaches to theorizing, based on context? Finally, should the context itself be the basis of theorizing? While the debate will not stop here, the future may hold a multiplicity of approaches, both indigenous and internationalized, for explaining emerging markets' contexts and, more specifically, for understanding internationalization of their economies and their multinationals. This article provides an overview of the debate on Chinese Theory of Business vs. Theory of Chinese Business, and highlights the contribution of three key articles utilizing a hybrid approach of adapted theory, controlling for the various multinational contexts. We conclude that no theory has a monopoly on explanation and a multi-levelj multidisciplinaiy, and, perhaps, Eastern-centric theory may prove to show great potential in future theories of emerging markets' multinationals.

We investigate the degree to which the presence of inward foreign direct investments (FDI) influences product innovation by emerging market firms. We begin with FDI spillover effects at the national level, the common approach in the literature. We further examine spillover effects at the subnational level because knowledge spillovers have been found to be localized. We study both intra-industry and inter-industry FDI spillovers in a subnational location, based on the distinction in the cluster literature between Marshall–Arrow–Romer specialization externalities and Jacobian diversification externalities. Using information from more than 346,000 Chinese manufacturing firms from 2000 to 2006, we find that Chinese firms improve product innovation when they are located in cities with concentrated foreign innovative activities in the same industry. These intra-industry spillover benefits decrease quickly, however, as foreign presence increases and, at high levels of foreign concentration, are dominated by the crowding-out effect. We also find evidence of inter-industry spillover benefits in a city; diversity of industries with a foreign presence contributes to product innovation by Chinese firms.

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.