Foreign Direct Investment in Natural Resource Industries in Africa ...

(e.g., weaker technological capabilities and brand names) and less international experience in
overseas markets (Luo and Tung, 2007).
Given the nature of the natural resource industries and the resulting political risks facing
Chinese MNEs as well as their weak ownership advantages, it remains a puzzle how Chinese
MNEs have been able to achieve such remarkable growth in these industries in Africa,
particularly relative to their Western counterparts who are traditionally dominant in most
markets. Our study attempts to shed light on this issue. In particular, we are interested in
examining the potential differences between Chinese and Western business models in Africa.
Extant research studies and business reports have pointed out that the development of
Chinese MNEs in Africa, especially state-owned MNEs, cannot be separated from the policy or
financial support provided by the Chinese government (Alden and Davies, 2006; Kragelund,
2010; Luo et al., 2010). Since 2000, with the unveiling of China’s “Going Global” policy, the
government has created a comprehensive system supporting outward FDI activities of Chinese
firms (Luo et al., 2010). In particular, the government issued an Outbound Catalogue Guidance
in 2004 to promote explicitly overseas natural resource exploration projects (Lu, Liu, and Wang,
2010; Luo et al., 2010). This is not surprising given that China has increasing demand for energy
and other raw materials to feed its rapidly growing economy (Broadman, 2007; Corkin, 2007;
Haglund, 2008). Since Africa has abundant and relatively untapped natural resources, the
Chinese government has been actively engaged in talks with African countries aimed at
strengthening economic ties with these countries (Broadman, 2007; Corkin, 2007; Haglund,
2008).
Our study therefore considers the important role of the Chinese government in facilitating
overseas investments of Chinese firms in Africa. Specifically, we examine how Chinese firms
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