nach oben

Management International Review

Erschienen in:

01.09.2009 | Research Article

Insider Control and the FDI Location Decision

Evidence from Firms Investing in an Emerging Market

verfasst von: Prof. Roger Strange, Prof. Igor Filatotchev, Ass. Prof. Yung-chih Lien, Prof. Jenifer Piesse

Erschienen in: Management International Review | Ausgabe 4/2009

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

This paper examines the FDI location strategies of firms from one of the Asian NIEs (Taiwan) in a rapidly emerging market (China). Although there is a substantial literature on FDI location choice, most studies model the choice as a function of a range of location-specific attributes such as local market size, labour costs etc. Few studies consider the impact of firm-specific characteristics, other than potential country-of-origin effects.
Yet locations, and especially those in emerging markets where institutions are weak and capital markets are immature, also differ in terms of their risk. Different shareholder constituencies within the parent company will typically have different preferences with regard to risk, and are therefore likely to favour some locations over others.
We find that the ownership structure of the parent company matters with regard to its FDI location decision and, in particular, that both family and non-family insider shareholders exert influence over the choice of location.
Furthermore we show that firms’ location and entry mode choices are inter-related, and establish that the extent of their resource commitments in their foreign affiliates leads parent companies to favour locations where the perceived risks are lower.
Finally we show that the efficacy of firms’ external relational linkages varies according to the strength of the cultural and historic ties between the location of the foreign affiliate and the home country.

Vorheriger Artikel Technological Competence and International Diversification

Nächster Artikel The Effects of Corporate Governance and Institutional Environments on Export Behaviour in Emerging Economies

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Management International Review

MANAGEMENT INTERNATIONAL REVIEW is a double-blind refereed journal that aims at the advancement and dissemination of research in the fields of International Management.

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

This risk-aversion argument may be augmented by control-related considerations associated with Williamson’s (1975) “markets vs hierarchies” framework. More specifically, wholly-owned affiliates provide the parent with greater opportunities to maximise returns on investment and greater control of proprietary assets. These benefits may be higher when the affiliate is located in areas with relatively more developed networks such as the South and Middle Coast areas of China, since network externalities may reinforce firm-level effects. We are grateful to an anonymous reviewer for pointing out this effect.

Aguilera, R. V./Jackson, G., The Cross-National Diversity of Corporate Governance: Dimensions and Determinants, Academy of Management Review, 28, 3, 2003, pp. 447–465.

Anderson, R./Reeb, D., Board Composition: Balancing Family Influence in S&P 500 Firms, Administrative Science Quarterly, 49, 2, 2004, pp. 209–237.

Aoki, M., Information, Corporate Governance, and Institutional Diversity, Oxford: Oxford University Press 2001.

Becht, M./Röell, A., Blockholdings in Europe: An International Comparison, European Economic Review, 43, 4/6, 1999, pp. 1049–1056.CrossRef

Belderbos, R. A./Carree, M., The Location of Japanese Investments in China: Agglomeration Effects, Keiretsu, and Firm Heterogeneity, Journal of the Japanese and International Economies, 16, 2, 2002, pp. 194–211.CrossRef

Broadman, H./Sun, X., The Distribution of Foreign Direct Investment in China, The World Economy, 20, 3, 1997, pp. 339–362.CrossRef

Bruton, G./Ahlstrom, D./Wan, J., Turnaround in East Asian Firms: Evidence from Ethnic Overseas Chinese Communities, Strategic Management Journal, 24, 6, 2003, pp. 519–540.CrossRef

Buckley, P. J., Asian Network Firms: An Analytical Framework, Asia Pacific Business Review, 10, 3/4, 2004, pp. 254–271.CrossRef

Buckley, P. J. et al., The Determinants of Chinese Outward Foreign Direct Investment, Journal of International Business Studies, 38, 4, 2007, pp. 499–518.CrossRef

Canfei, H., Regional Decentralisation and Location of Foreign Direct Investment in China, Post-Communist Economies, 18, 1, 2006, pp. 33–50.CrossRef

Carpenter, M./Fredrickson, J., Top Management Teams, Global Strategic Posture, and the Moderating Role of Uncertainty, Academy of Management Journal, 44, 3, 2001, pp. 533–546.CrossRef

Cassidy, J. F./Andreosso-O’Callaghan, B., Spatial Determinants of Japanese FDI in China, Japan and the World Economy, 18, 4, 2006, pp. 512–527.CrossRef

Chadee, D./Qiu, F./Rose, E., FDI Location at the Subnational Level: A Study of EJVs in China, Journal of Business Research, 56, 10, 2003, pp. 835–845. CrossRef

Chang, S., Ownership Structure, Expropriation, and Performance of Group-Affiliated Companies in Korea, Academy of Management Journal, 46, 2, 2003, pp. 238–254. CrossRef

Chen, C., Regional Determinants of Foreign Direct Investment in Mainland China, Journal of Economic Studies, 23, 2, 1996, pp. 18–30.CrossRef

Chen, H./Chen, T.-J., Network Linkage and Location Choice in Foreign Direct Investment, Journal of International Business Studies, 29, 3, 1998, pp. 445–467.CrossRef

Cheng, L. K./Kwan, Y. K., What Are the Determinants of the Location of Foreign Direct Investment? The Chinese Experience, Journal of International Economics, 51, 2, 2000, pp. 379–400.CrossRef

Cheng, S., The Role of Labour Cost in the Location Choices of Japanese Investors in China, Papers in Regional Science, 85, 1, 2006, pp. 121–138.CrossRef

Cheng, S., Structure of Firm Location Choices: An Examination of Japanese Greenfield Investment in China. Asian Economic Journal, 21, 1, 2007, pp. 47–73.CrossRef

Child, J., Strategic Choice in the Analysis of Action, Structure, Organizations and Environment: Retrospect and Prospect, Organization Studies, 18, 1, 1997, pp. 43–76.CrossRef

Claessens, S./Djankov, S./Lang, L., The Separation of Ownership and Control in East Asian Corporations, Journal of Financial Economics, 58, 1, 2000, pp. 81–112.CrossRef

Coughlin, C. C./Segev, E., Foreign Direct Investment in China: A Spatial Econometric Study, The World Economy, 23, 1, 2000, pp. 1–23.CrossRef

Crouch, C., Capitalist Diversity and Change: Recombinant Governance and Institutional Entrepreneurs, Oxford: Oxford University Press 2005.

Dam. L./Scholtens, B./Streken, E., Corporate Governance and International Location Decisions of Multinational Enterprises, Corporate Governance: An International Review, 15, 6, 2007, pp. 1330–1347.

Filatotchev, I. et al., Effect of Post-Privatization Governance and Strategies on Export Intensity in the Former Soviet Union, Journal of International Business Studies, 32, 4, 2001, pp. 853–871.CrossRef

Filatotchev, I./Lien, Y.-C./Piesse, J., Corporate Governance and Performance in Publicly Listed, Family-Controlled Firms: Evidence from Taiwan, Asia Pacific Journal of Management, 22, 3, 2005, pp. 257–283. CrossRef

Filatotchev, I. et al., FDI by Firms from Newly Industrialised Economies in Emerging Markets: Corporate Governance, Entry Mode and Location, Journal of International Business Studies, 38, 4, 2007, pp. 556–572.CrossRef

Finkelstein, S./Hambrick, D., Strategic Leadership: Top Executives and their Effects on Organizations, Minneapolis: West Publishers 1996.

Gao, T., Ethnic Chinese Networks and International Investment: Evidence from Inward FDI in China, Journal of Asian Economics, 14, 4, 2003, pp. 611–629.CrossRef

Gao, T., Labor Quality and the Location of Foreign Direct Investment: Evidence from FDI in China by Investing Country, China Economic Review, 16, 3, 2005, pp. 274–292.CrossRef

Greene, W. H., Econometric Analysis, Fourth Edition, New Jersey: Prentice Hall 2001.

Hall, P. A./Soskice, D., Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, Oxford: Oxford University Press 2001.

Hamilton, G., The Organizational Foundations of Western and Chinese Commerce: A Historical and Comparative Analysis’, in Hamilton, G. (ed.), Asian Business Networks, New York: Walter de Gruyter 1996, pp. 43–58.

He, C., Location of Foreign Manufacturers in China: Agglomeration Economies and Country of Origin Effects, Papers in Regional Science, 82, 3, 2003, pp. 351–372. CrossRef

He, C., Regional Decentralization and Location of Foreign Direct Investment in China, Post-Communist Economies, 18, 1, 2006, pp. 33–50.CrossRef

Head, K./Ries, J., Inter-City Competition for Foreign Investment: Static and Dynamic Effects of China’s Incentive Areas, Journal of Urban Economics, 40, 1, 1996, pp. 38–60.CrossRef

Hennart, J. F./Park, Y.-P., Location, Governance, and Strategic Determinants of Japanese Manufacturing Investment in the United States, Strategic Management Journal, 15, 6, 1994, pp. 419–436.CrossRef

Hensher, D. A./Rose, J. M./Greene, W. H., Applied Choice Analysis: A Primer, Cambridge: Cambridge University Press 2005.

Hoskisson, R. E. et al., Conflicting Voices: The Effects of Institutional Ownership Heterogeneity and Internal Governance on Corporate Innovation Strategies, Academy of Management Journal, 45, 4, 2002, pp. 697–716.CrossRef

Hsing, Y.-T., Blood, Thicker than Water: Interpersonal Relations and Taiwanese Investment in Southern China, Environment and Planning A, 28, 12, 1996, pp. 2241–2261.CrossRef

Johansen, J./Mattsson, L.-G., Internationalization in Industry System: A Network Approach, in Hood, N./Vahlne, J.-E. (eds.), Strategies in Global Competition, London: Routledge 1987, pp. 287–314.

La Porta, R./Lopez-de-Silanes, F./Shleifer, A., Corporate Ownership Around the World, Journal of Finance, 54, 2, 1999, pp. 471–517.CrossRef

Li, P. P., Toward a Geocentric Theory of Multinational Evolution: The Implications from the Asian MNEs as Latecomers, Asia Pacific Journal of Management, 20, 2, 2003, pp. 217–242.CrossRef

Li, S. M./Park, S. H., Determinants of Locations of Foreign Direct Investments in China, Management and Organization Review, 2, 1, 2006, pp. 95–119.CrossRef

Lien, Y.-C. et al., The Role of Corporate Governance in FDI Decisions: Evidence from Taiwan, International Business Review, 14, 6, 2005, pp. 739–773.CrossRef

Luo, Y./Tung, R. L., International Expansion of Emerging Market Enterprises: A Springboard Perspective, Journal of International Business Studies, 38, 4, 2007, pp. 481–498.CrossRef

Makino, S./Lau, C.-M./Yeh, R.-S., Asset-Exploitation versus Asset-Seeking: Implications for Location Choice of Foreign Direct Investment from Newly Industrialized Economies, Journal of International Business Studies, 33, 3, 2002, pp. 403–421.CrossRef

Marshall, A., Principles of Economics, London: Macmillan 1920.

Meyer, K./Nguyen, H., Foreign Investment Strategies and Sub-National Institutions in Emerging Markets: Evidence from Vietnam, Journal of Management Studies, 42, 1, 2005, pp. 63–94.CrossRef

Ng, L. F.-Y./Tuan, C., Spatial Agglomeration, FDI, and Regional Growth in China: Locality of Local and Foreign Manufacturing Investments, Journal of Asian Economics, 17, 2, 2006, pp. 691–713.CrossRef

Priem, R. L., Top Management Team Group Factors, Consensus, and Firm Performance, Strategic Management Journal, 11, 6, 1990, pp. 469–478.CrossRef

Rauch, J., Networks Versus Markets in International Trade, Journal of International Economics, 48, 1, 1999, pp. 7–35.CrossRef

Rauch, J./Trinidade, V., Ethnic Chinese Networks and International Trade, Review of Economics and Statistics, 84, 1, 2002, pp. 116–130.CrossRef

Sun, Q./Tong, W./Yu, Q., Determinants of Foreign Direct Investment Across China, Journal of International Money and Finance, 21, 1, 2002, pp. 79–113.CrossRef

Taiwan Electrical and Electronic Manufacturers’ Association, 2003 Survey for Investment Environment in China, Taipei: TEEMA 2003.

Tang, G. Y. N./Shum, W. C., The Risk-Return Relations: Evidence from the Korea and Taiwan Stock Markets, Applied Economics, 39, 15, 2007, pp. 1905–1919.CrossRef

Tong, S. Y., Ethnic Chinese Networking in Cross-Border Investment: The Impact of Economic and Institutional Development, HIEBS Working Paper No. 1024, April 2001.

Van Auken, H. E./Su, C., A Risk Assessment of Taiwanese Investments in China, Journal of Entrepreneurship, 5, 2, 1996, pp. 179–191.CrossRef

Wakasugi, R., The Effects of Chinese Regional Conditions on the Location Choice of Japanese Affiliates, Japanese Economic Review, 56, 4, 2005, pp. 390–407.CrossRef

Wei, Y. et al., The Regional Distribution of Foreign Direct Investment in China, Regional Studies, 33, 9, 1999, pp. 857–867. CrossRef

Weidenbaum, M./Hughes, S., The Bamboo Network, New York: Free Press 1996.

Williamson, O. E., Markets and Hierarchies, New York: Free Press 1975.

Wright, M. et al., Strategy Research in Emerging Economies: Challenging the Conventional Wisdom, Journal of Management Studies, 42, 1, 2005, pp. 1–33.CrossRef

Zhang, K. H., Why Does China Receive so much Foreign Direct Investment?, China & World Economy, 3, 2002, pp. 49–58.

Zhang, L.-Y., Location-Specific Advantages and Manufacturing Direct Foreign Investment in South China, World Development, 22, 1, 1994, pp. 45–53.CrossRef

Zhang, Z./Xu, X./Zhang, W.-B., The Dynamics of Political and Economic Interactions between Mainland China and Taiwan, Papers in Regional Science, 82, 3, 2003, pp. 373–388.CrossRef

Zhao, H./Zhu, G., Location Factors and Country of Origin Differences: An Empirical Analysis of FDI in China, Multinational Business Review, 8, 1, 2000, pp. 60–73.

Zhou, C./Delios, A./Yang, J. Y., Locational Determinants of Japanese Foreign Direct Investment in China, Asia Pacific Journal of Management, 19, 1, 2002, pp. 63–86.CrossRef

Titel: Insider Control and the FDI Location Decision
Evidence from Firms Investing in an Emerging Market
verfasst von: Prof. Roger Strange
Prof. Igor Filatotchev
Ass. Prof. Yung-chih Lien
Prof. Jenifer Piesse
Publikationsdatum: 01.09.2009
Verlag: SP Gabler Verlag
Erschienen in: Management International Review / Ausgabe 4/2009
Print ISSN: 0938-8249
Elektronische ISSN: 1861-8901
DOI: https://doi.org/10.1007/s11575-009-0003-x

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Management International Review

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 4/2009

Technological Competence and International Diversification

Corporate Governance and International Business

The Effects of Geographic Distance on the Foreign Acquisition Activity of U.S. Firms

Structural Reform and Firm Exports

The Effects of Corporate Governance and Institutional Environments on Export Behaviour in Emerging Economies

Premium Partner