Challenges in the Era of Globalization - iaabd

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Proceedings of the 12th Annual Conference © 2011 IAABD A Conceptual Model of the Internationalization Strategies of Chinese State and Private Sector Enterprises in Africa Abstract Xiaohua Lin, hlin@ryerson.ca Carlyle Farrell, farrellc@ryerson.ca Global Management Studies DepartmentTed Rogers School of Management Ryerson University, Ryerson Business Building, Toronto Ontario This paper presents a conceptual model of the internationalization strategies of Chinese state and private sector enterprises. Specifically we present a framework to better understand the strategic decisions and performance outcomes of Chinese state-owned enterprises (CSOEs) and Chinese privately owned enterprises (CPOEs) as they pursue investment opportunities in Africa. For future empirical investigations, we offer a set of testable propositions comparing the two types of Chinese enterprises entering African markets: in comparison to CSOEs, CPOEs are more likely to be driven by economic rationality and take a diversified orientation, to have weaker corporate governance and engage local African communities in business process to a lesser extent, and to become profitable quicker but lack stability in the longer term. The paper concludes with a discussion of managerial and policy implications. Introduction This paper presents a conceptual model of the internationalization strategies of Chinese state and private sector enterprises. Specifically we present a framework to better understand the strategic decisions and performance outcomes of Chinese state-owned enterprises (CSOEs) and Chinese privately owned enterprises (CPOEs) as they pursue investment opportunities in Africa. It should be recognized that much of the literature on Chinese foreign direct investment in Africa has focused on the strategies and tactics of state owned enterprises (see for example Kaplinsky and Morris, 2009). To date little has been written on the involvement of privately owned Chinese enterprises on the African continent, despite their increasing importance (Gu, 2009; Wang, 2007). Appealing to Dunning’s OLI framework and notions of path dependency (Nelson and Winter, 1982) we offer a number of propositions to explain the strategies, governance structures and performance outcomes of CSOEs and CPOEs as they pursue internationalization opportunities in Africa. China’s involvement in Africa dates back to the Ming dynasty (1368-1644) when China launched maritime expeditions to countries now known as Somalia, Kenya and Madagascar in search of exotic treasures (le Pere, 2007; Broadman, 2009). With the end of the Second World War and the birth of the People’s Republic of China (PRC) in 1949 Sino-African relations entered a new phase with China providing material support to several African countries in their struggle for independence. Contemporary Sino-African relations, however, date back to the 1955 Bandung Conference – a meeting of Asian and African nations designed to promote economic and cultural collaboration. Beginning in the early 1960s a number of high-level Chinese officials visited African nations in an attempt to consolidate diplomatic and 762
Challenges in the Era of Globalization Edited by Emmanuel Obuah economic relations. The results of these visits were manifested in the strong support from African nations in China’s bid for a seat on the United Nations Security Council in 1971. Efforts to maintain close ties with the African continent certainly intensified following the liberalization of the Chinese economy in 1978 and the institution of economic reforms. Africa provided China with valuable political support in her accession to the World Trade Organization in 2001 and China in turn provided increased development assistance and cancelled the debts of a number of the poorer African countries (Tull, 2006). Today China’s engagement in Africa is driven by four major considerations (a) access to natural resources, (b) access to final product markets on the continent, (c) improving China’s leverage in international relations, and (d) ending Taiwan’s diplomatic influence on the continent ((le Pere, 2007 and Shinn, 2009). China’s involvement in Africa has clearly evolved over the years. China began to provide financial assistance to Africa in the 1970s that was more focused on strengthening ideological ties with the continent. Today China’s assistance to the region is predicated on economic objectives in addition to more humanitarian or idealistic motivations. This paper will focus on economic issues, specifically direct foreign investment and the internationalization strategies of CSOEs and CPOEs. Research Objectives This paper will attempt to achieve the following specific objectives: ( a ) to profile China’s foreign direct investment in Africa. ( b ) To compare the internationalization strategies, governance structures and performance outcomes of CSOEs and PSOEs in Africa. ( c ) To develop the managerial and policy implications of the differences in the internationalization strategies of CSOEs and CPOEs in Africa. Organization This paper is organized into six major sections. Following this brief introduction is presented an overview of Chinese foreign direct investment in Africa. In the third section is provided a review of the theoretical literature considered germane to this study’s research objectives. Our conceptual model is discussed in the fourth section along with a number of testable research propositions. The managerial and policy implications of our work are outlined in the fifth section while the sixth and final section provides a few concluding observations. Chinese Foreign Direct Investment in Africa: Data provided by National Bureau of Statistics of China indicate a sharp acceleration in net overseas direct investment (ODI) in Africa over the period 2004 to 2008. As illustrated in Table 1 China’s overseas direct investment in Africa increased from $US31.7 million in 2004 to $US 549 million in 2008. China’s ODI stock in Africa similarly showed significant gains rising from $US 159.5 million in 2005 to $US 780.3 million in 2008. It should be recognized that these data may well understate the true level of China’s direct foreign investment in Africa. An ECOWAS-SWAC/OECD report, for example, put the 763
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Table of Contents Challenges in the
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Lennart Bangens, Goteborg, Sweden C
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Local Steering Committee Jacob Musi
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Track 1: Accounting, Finance, and I
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Abstract Challenges in the Era of G
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Abstract Determinants of Bank Lendi
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Empirical Results Challenges in the
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Table 3 Determinants of Competitive
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Research Findings Challenges in the
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Abstract: Study on Africa Governmen
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Abstract Challenges of Oil Revenue
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Abstract Land Based Sources of Poll
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Abstract On the Mitigation of Rever
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Figure 1: Lagos off shore survey po
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Track 5: Management Education Chall
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Table: Model Fitness Regression Sta
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Conclusion Challenges in the Era of
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37. Provision of sound education fo
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The cost structure Challenges in th
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Empirical Analysis Challenges in th
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Variable Coefficient Std. Error t-S
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Abstract The Changing Requirements
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The Model, Data and Variable Defini
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Empirical results Challenges in the
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Abstract Gender, poverty and sustai
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Figure 1.1: Spread of directorships
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Theoretical Framework Challenges in
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Single 18.1 Masters and above 35.3
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Source: Field survey, 2010 Table 3:
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Conceptual Definitions Challenges i
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Conclusions and Implications Challe
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Abstract Exploring Organisational R
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Defining the Organisational Culture
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Table 1: A Summary of Operating Ban
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Discussion and Conclusion Challenge
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Abstract What does Globalization me
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Statement of the Problem Challenges
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Banks in Ghana Challenges in the Er
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References: Challenges in the Era o
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The study seeks to: • examine typ
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Figure 2: Customer Perception of MT
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Relationship Commitment Total 1264.
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Conclusion Dissatisfied 6 3.4 3.6 7
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Discussion Challenges in the Era of
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