Becoming multinational: challenges for Chinese firms
| Published date | 02 October 2009 |
| Date | 02 October 2009 |
| Pages | 149-162 |
| DOI | https://doi.org/10.1108/17544400910994733 |
| Author | Oded Shenkar |
| Subject Matter | Economics |
Challenges for
Chinese firms
149
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 2 No. 3, 2009
pp. 149-162
#Emerald Group Publishing Limited
1754-4408
DOI 10.1108/17544400910994733
Becoming multinational:
challenges for Chinese firms
Oded Shenkar
Fisher College of Business, The Ohio State University,
Columbus, Ohio, USA
Abstract
Purpose – The purpose of this paper is to examine the features of Chinese multinational enterprises
(MNEs), and identify the obstacles that Chinese firms must overcome if they are to become viable
global competitors, as well as some of the strategies that can take them there.
Design/methodology/approach – Based on statistical data, the paper examines entry mode ,
regional and geographical distribution of Chinese outward foreign direct investment. It also discusses
the obstacles, weaknesses and strengths of Chinese firms, and suggests where and how such firms
can improve their capabilities.
Findings – If they are to become global competitors, Chinese firms need to develop an ‘‘MNE with
Chinese characteristics’’ which builds on strengths such as a deep understanding of personal networks to
solidify coordination and takes advantage of a tradition of appreciation of human relationships.
Originality/value – The paper presents a great deal of insight into Chinese MNEs.
Keywords Multinational companies, International investments, Emerging markets, China,
Globalization
Paper type Research paper
Introduction
Although MNEs from developed nations still dominate global business, multinational
enterprises (MNEs) from emerging economies are proving to be viable, if not
formidable competitors. South Korea’s Samsung, Brazil’s Embraer and Israel’sTeva are
just three examples of emerging market MNEs that are holding their own against
venerable names in electronics, aerospace and pharmaceuticals, respectively. Now, the
turn of Chinese firms seems to have come: while still representing a miniscule
proportion of global foreign direct investment (FDI), roughly 1,500 Chinese firms went
abroad yearly in 2007-2008, up from 1,000 in 2004-2006 (Rosen and Hanemann, 2009).
The question arises as to how many of those, if any, will join their range offull-fledg ed
MNEs that compete successfully in international markets using a globally dispersed
value chain, or will be limited to international involvement in the form of exp orts and/
or original equipment manufacturing (OEM) business with physical presence
constrained to representative offices, warehousing and the like. Will Chinese MNEs be
driven abroad by the same motives as their predecessors? Will they be seeking similar
markets and assets? Will they display features and strategic behavior that are
consistent with those of developed country or current emerging market MNEs, or will
they evolve into ‘‘multinationals with Chinese characteristics’’? Those are some of the
questions that are being raised around the world today in both academic and
practitioner circles. The answers to those questions are of major importance to Chines e
firms that seek to become successful MNEs, their supplier s, owners, employees and
other stakeholders; to the Chinese government who is seeking to groom indigenous
‘‘global champions’’; and to the foreign MNEs and other firms that face competition
from Chinese firms in China’s home market as well as in international markets.
In this brief essay, I consider some of the above questions and offer some
preliminary answers. Among other things, I examine the features of developing market
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