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The Rise of Chinese Multinational Enterprises in the United States: Heterogeneity of Institutional Ownership, Guanxi Capitalism, and Spatial Agglomeration

Authors: Lisha He*,
Topics: Economic Geography, Business Geography, China
Keywords: Outbound foreign direct investments (OFDI); Chinese multinational enterprises (MNEs), institutional ownership, ethnic networks, spatial agglomeration
Session Type: Paper
Presentation File: No File Uploaded

The sustained growth of outbound foreign direct investments (OFDI) is a salient feature of globalization. In recent decades, the expansion of Chinese multinational enterprises (MNEs) into advanced economies have reshaped the global business landscape. Unlike Western MNEs, their Chinese counterparts possess unique traits including complex institutional ownership, while the role of interpersonal relationships (guanxi) is also an important influence. In addition, the effects of spatial agglomeration on the locational decision of FDI have been largely ignored by previous studies which may lead the biased and inefficient results. To shed light on the investment motivation and behavior of Chinese MNEs, we apply a panel dataset of Chinese OFDI in the United States at the state level from 2005-2017 and use a spatial econometric model to investigate the effect of spatial agglomeration on Chinese OFDI. Our core finding demonstrates that the firm heterogeneity interacts with the investment strategy and agglomeration behavior. State-owned enterprises (SOEs) are more likely to apply greenfield investment to achieve market-seeking, while private-owned enterprises (POEs) prefer to use acquisition investment entering the market to seek strategic assets in the US. Additionally, our results confirm that ethnic networks play a vital role in Chinese OFDI by supporting the investors accessing the US market more effectively. Finally, the existence of positive spatial dependence in Chinese OFDI from private firms reveals that spatial agglomeration is one of the primary factors affecting the location decision of Chinese OFDI.

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