We examine the extent to which Chinese government support of foreign direct investment (FDI) projects and host country institutional environments interact with prior entry experience by Chinese ...firms, and how this interrelationship affects FDI undertaken by Chinese firms. We hypothesize that home country government support and well-established host country institutions enhance organizational capabilities to take risks in FDI. As such, they reduce the need to accumulate experiential knowledge and capabilities relating to entering host countries based on prior entry experience in a particular country when undertaking follow-up investment projects. Using a unique, hand-collected panel data set of Chinese publicly listed firms during 2002-2009, we find that home government support and well-developed host country institutions reduce the importance of prior entry experience and significantly increase the likelihood of FDI entry into a host country. Further, from our subsample analyses we identify differences between entering developed and developing host countries in terms of the impact of home country government support and quality of host country institutions. Our findings help explain the puzzle concerning why emerging economy firms have rapidly internationalized in a short period of time and do not follow the pattern predicted by classical IB theories.
State-owned (SO) enterprises are subject to more complex institutional pressures in host countries than private firms. These institutional pressures arise from a weak legitimacy of "state ownership" ...in some countries, which arises from a combination of ideological conflicts, perceived threats to national security, and claimed unfair competitive advantage due to support by the home country government. These institutional pressures directed specifically at SO firms induce them to adapt their foreign entry strategies to reduce potential conflicts and to enhance their legitimacy. Testing hypotheses derived from this theoretical argument for subsidiaries of listed Chinese firms, we find that SO firms adapt mode and control decisions differently from private firms to the conditions in host countries, and these differences are larger where pressures for legitimacy on SO firms are stronger. These findings not only extend institutional theory to better explain differential effects on different entrants to an organizational field, but demonstrate how foreign investors of idiosyncratic origins may proactively build legitimacy in host societies.
Political risk spreads Bekaert, Geert; Harvey, Campbell R; Lundblad, Christian T ...
Journal of international business studies,
05/2014, Letnik:
45, Številka:
4
Journal Article
Recenzirano
We introduce a new, market-based and forward-looking measure of political risk derived from the yield spread between a country's US dollar debt and an equivalent US Treasury bond. We explain the ...variation in these sovereign spreads with four factors: global economic conditions, country-specific economic factors, liquidity of the country's bond, and political risk. We then extract the part of the sovereign spread that is due to political risk, making use of political risk ratings. In addition, we provide new evidence that these political risk ratings are predictive, on average, of future risk realizations using data on political risk claims as well as a novel textual-based database of risk realizations. Our political risk spread measure does not make the mistake of double counting systematic risk in the evaluation of international investments, as some conventional measures do. Furthermore, we show how to construct political risk spreads for countries that do not have sovereign bond data. Finally, we link our political risk spreads to foreign direct investment (FDI). We show that a 1% point reduction in the political risk spreads is associated with a 12% increase in netinflows of FDI.
Local firms may attract productivity spillovers from foreign investors, yet these vary with local firms' awareness, capability and motivation to react to foreign entry. In consequence, spillovers ...vary across countries at different levels of economic development. We apply competitive dynamics theory to analyze these contextual moderators of spillovers, and test hypotheses thus derived in a meta-analysis of the empirical literature on spillovers. Our analysis suggests a curvilinear relationship between spillovers and the host country's level of development in terms of income, institutional framework and human capital.
This paper investigates the economic and financial determinants of Turkiye's telecommunication infrastructure from 1970 to 2022. To analyze the impact of trade openness, gross domestic product, and ...foreign direct investments on telecom infrastructure, we employ the Maki cointegration test proposed by Maki (2012) 10, which accounts for multiple endogenous structural changes without requiring the number of these changes to be determined a priori. Following the finding of a long-run relationship between the variables, to assess the effect of the regressors on the telecommunication infrastructure, we estimate the long-run relationship using the fully modified ordinary least squares (FMOLS). The findings of the FMOLS model show that all the coefficients are statistically significant and positive, indicating that all the considered variables have an increasing effect on telecommunication infrastructure. Accordingly, a 1 % increase in trade openness, foreign direct investments, and gross domestic product is associated with an average change of 0.942 %, 0.301 %, and 0.911 %, respectively, in telecommunication infrastructure. Since the significance, magnitude, and sign of the coefficients may change over time, we also estimate the long-run coefficients in a time-varying form. Our findings indicate that while foreign direct investment and gross domestic product have a positive coefficient in most of the sample period, trade openness is insignificant in the majority.
•We attempt to investigate the economic and financial determinants of telecommunication infrastructure for Turkiye from 1970 to 2022.•To analyze the impact of trade openness, gross domestic product, and foreign direct investments on telecom infrastructure, we employ the Maki cointegration test.•Following finding a long-run relationship between the variables, to assess the effect of the regressors on the telecommunication infrastructure, we estimate the long-run relationship using the FMOLS.•The findings of the FMOLS model show that all coefficients are statistically significant and positive which indicates that all the considered variables have an increasing effect on the telecommunication infrastructure.
This study investigates the value of the strategic flexibility provided by firms' international investments during an economic crisis, defined here as an unanticipated significant downturn in the ...economy. To avoid below-par performance, firms need to adapt quickly to this significant change in their environment, making real options very valuable to them. Although firms' international investments can potentially provide such flexibility, this issue has not been empirically examined in a context of such dramatic negative change. We consider two types of international investments by firms in this regard, foreign direct investments and export-related international investments, developing two measures that directly assess the flexibility derived from each that are new to the literature. Based on these measures, we find evidence that both types of international investments provided valuable flexibility for Korean firms during the economic crisis conditions. This study contributes to the literature by showing that firms with real options investments in place have a greater ability to flexibly adapt their overall operations in line with unforeseen negative environmental change, in contrast to firms without such investments.
This paper’s objective is to present a comprehensive view on the evolution of the Romania’s exports between 2018-2022 and its interdependence with imported goods and foreign direct investments in the ...same period. This topic is particularly relevant nowadays since world is going thru multiple crises that indicates turbulent times at least on short and medium term. Romania, with a long-term war at its borders, is facing the biggest challenges after the 2008 financial crisis and need to understand its current status quo on the international trade and areas on which should focus to obtain a competitive advantage through cost, differentiation, or both. These tempestuous times are an opportunity for Romania to address the current challenges and to assure a transition to a stronger and resilient economy. Therefore, the paper will analysis the Romania competitiveness in the international trade in the current context and will offer a view on the potential competitive advantages. Besides capturing the evolution of exports, imports and foreign direct investments, the paper includes recommendations that could be valuable for exporting companies and the government of Romania in understanding the potential actions that could be taken to obtain a competitive advantage.
In light of the upsurge in Chinese investments in Africa since Deng’s “Go Global” policy, we study whether the location choices of greenfield investors in Africa differ between Chinese and ...non-Chinese firms. We focus on risk- and information-related factors, i.e., investment protection provided by investment agreements and country-of-origin, industry, and internal agglomeration. We argue that Chinese firms enjoy ownership advantages that reduce their concern for risk. Our results show that Chinese firms are less sensitive to risk-mitigating factors compared to firms from advanced and other emerging economies. A lower reliance on internal agglomeration emerges as their distinctive trait in internationalization. We attribute this result to the systemic engagement of the Chinese government, which goes beyond state ownership and reduces the “liability of foreignness”. Chinese firms also appear more market-seeking and manufacturing-oriented, aggressively pursuing knowledge spillovers. Contrary to common perceptions, they do not seem distinctively resource-seeking or to pursue unstable countries.
•We compare Chinese vs non-Chinese FDI determinants in Africa at investment level.•Chinese FDI rely less on prior firm experience, country-of-origin agglomeration and IIA.•Market size and human capital are distinctive determinants of Chinese FDI to Africa.•Natural resources and political stability are not.•Findings are consistent with State support mitigating risk and providing information.
This paper examines how foreign direct investments (FDI) affect energy consumption in the panel data of 29 Belt and Road Initiative (BRI) economies from 2000 to 2021. The paper runs several panel ...data techniques, which concurrently accommodate the dataset's cross-sectional dependency, slope heterogeneity, and structural break concerns in the cointegration. The results show that global FDI positively affects energy consumption. China's FDI dominance also has a favorable effect on energy consumption. In addition, green technologies increase energy consumption. These results emphasise the significance of FDI policies and green technologies regarding promoting energy demand in the BRI economies.
•We examine the effects of FDI on energy consumption.•We focus on the panel data of 29 BRI economies from 2000 to 2021.•We run various panel data techniques to address several issues.•FDI and China's FDI positively affect energy consumption.•Green technologies increase energy consumption.
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