Institutional Environment as a Determinant of Chinese Private Firm Export Behaviors

This paper presents the results of the authors’ detailed research into competition between multinationals and local Chinese companies in 10 industries over the past five years. They conclude that local companies are now threatening multinationals’ plans to conquer the China market. They analyse this new competitive game in terms of a dynamic battle of competencies. Multinationals start off with better industry-specific technology and know-how, and a higher level of competence in key functions like marketing and financial management. Chinese companies enjoy a better understanding of the local market, lower

Since the openness policy in1978, China has attracted a magnitude of foreign direct investment from all over the world. Rapid economic growth, large market opportunity, and endless cheap high-quality labor forces have turned China into a utopia of investment. With its evolving economy and enormous array of market opportunities for foreign investment, China’s institutional environment has played a dynamic role in its economic state (Marinov & Marinova, 2012). According to Geringer, Minor, and Mcnett (2014), institutions involves the country’s rules, regulations, and informal codes of behavior that helps administrate the country’s economic position. Institutions influence behavior in several ways whether it’s through laws or regulations, or through norms, values, customs, and ideologies (Geringer et al., 2014). Institutions also define conditions and set limits for maintaining a stable system as they control social relations to maintain conformity.

China’s accession to the WTO in 2001 has helped shape its economy to becoming a more predictable environment for trade and foreign investment. Corporate governance and frameworks for business operations and interactions have improved, providing a much more transparent environment. (Deckers, 2004)

China is an excellent country which has rapid changes in both social and economic after introduced the Open Door policy in 1982. With the economic reforms, it introduced many foreign companies to invest in China and has great influence on enterprises and market. The economy in China has developed at a high speed during last thirty years and growing at around 9.6 percent every year on average. China joined the World Trade Organization (WTO) in 2001 which means an extension of the reform, meanwhile, brings the new opportunities to Chinese companies’ growth. The development of both society and economy in China helped introduced foreign direct investment. At the same time, Chinese enterprises invested abroad and got access to foreign resources, new markets, human capital, technology, and knowledge. Therefore, multinational enterprise seems little by little to be a key factor in China’s economic ambitions which is also an essential role in the worldwide globalization.

The Export-Import Bank of the United States just lapsed for the first time in over 80 years on June 30, 2015. The primary activity of the Export-Import Bank is to provide export subsidies to buyers and sellers of U.S. exports. Its ultimate goal is to shift global market share to U.S.-based corporations and away from corporations headquartered in other countries so as to boost the U.S. economy on the global scale. The purpose of this paper is to determine the economic effectiveness and impact of the Bank and to discuss the implications for international, national and local economies should the Bank fail to be reauthorized by Congress and permanently expire.

From a firm’s perspective, tariffs, subsidies, quotas, VERs and LCRs all have the same effect of raising the firm’s costs above the level that could be achieved without trade barriers. Hill (2011) argues that the higher costs resulting from the trade barriers do not necessarily translate into a competitive disadvantage provided they are applied (by a country imposing them) to all similar products by other foreign firms. He further notes that when trade barriers are targeted at a particular nation’s exports, then this places the firm from that nation at a competitive disadvantage compared to other foreign firms. In this case the firm has two options. The first option is to move production into the country imposing the trade barriers and the second is to move production activities into countries whose exports are not targeted. The choice of which strategic option to take is a management decision requiring a high level of skill.

I will use the panel data on China’s OFDI to 60 countries during 2007-2015.The data can be collected from Statistics Bulletin of China’s Outward Foreign Direct Investment(2015).The goal of empirical study is to test whether the China’s overseas investment in emerging market countries has a better performance in promoting its exports.So i divide the countries in sample into two groups.One group includes 30 developed countries,the another group contains 30 emerging market countries.The group of emerging market

In the current decade most of the relevant research is focused on examining the impact of specific factors on the entry mode decision. Among these factors institution attracted greatest attention. Some papers extended the TCA theory by adding institutional factors into the given framework (Brouthers 2002; Lu 2002). Others argued that institution affects the entry mode decision by increasing the cost of uncertainty and transaction (Said and McDonald 2002; Meyer 2000). Further factors which have been examined empirically are: technology transfer (Mattoo

Trade regulation policies can vary based on the imports and exports of the country. China is one of the biggest emerging economies, with immense potential to

Conclusion: Foreign firms do face various obstacles in entering the Chinese market, however they can be overcome if the right levels of research is carried out and they come to terms with the differences in business structure and social environment.

changes in the economy. The previous example of China as an exporter is true, however it must

For awareness of national rules/policies, leading Chinese manufacturers have a significantly advanced level than both small and medium-sized Japanese manufacturers and traditional Chinese manufacturers. Such a condition may outcome from the fact that Chinese rules and policies mostly target leading manufacturers in the current primary stage (Lau and Wang, 2009). Hypothesis 1 is commonly supported.

This pattern is very different from what has taken shape in East Asia, especially China. The FDI directed China is both market-seeking and efficiency-seeking.

There are two types of strategies for foreign locations, a centralized location from which a facility can serve the world market and a decentralized location where facilities are set up in various regional or national locations close to major markets. A centralized location is chosen when there is a substantial difference among various countries in manufacturing costs due to each country’s costs, political economy, and culture. It’s preferred when trade barriers are low, exchange rates are expected to remain stable, the product’s value-to-weight ratio is high, and the product serves universal needs. If the production technology used by the firm has high fixed costs and high minimum efficient scale relative to global demand they can benefit from a centralized location. Centralizing is also favored when externalities arise from the concentration of like enterprises that favor certain locations. Conversely, decentralization is preferred when trade barriers are high, location externalities aren’t important, exchange rates are volatile, the product’s value-to-weight ratio is low, and the product does not serve universal needs. If production technology has low fixed costs, low minimum efficient scale and flexible manufacturing technology is not available, decentralizing is favored. Decentralization is also chosen if manufacturing costs in various countries are not substantially impacted by differences in factor costs, political economy, and culture.

Hsu, W., Chen, H., & Cheng, C. (2013). Internationalization and firm performance of SMEs: The moderating effects of CEO attributes. Journal of World Business, 48, 1–12.