THE ROLE OF FOREIGN DIRECT INVESTMENT IN UPGRADING CHINA'S COMPETITIVENESS
John H. Dunning
This article assesses the role of foreign direct investment in upgrading the competitiveness of recipient countries with particular reference to the contemporary needs of China. In particular, it examines how this role changes as a country moves along its investment development path, and how host governments have to reorient their locational strategies in order to attract and retain the kind of resources and capabilities, which only foreign firms can provide.
THE ECLECTIC PARADIGM: A NEW DEAL?
The 1970s was a decisive period in terms of theories of internationalization. Suffice it to mention the Uppsala model (1975, 1977), the transaction costs theory (1975) and the Porterian framework which was developed through the late 70s and ultimately presented in 1980. During the 1980s the development was spurred on with increasing emphasis on the process of internationalization. Resource-dependency and the resource-based view were added. 1976 saw the birth of the “eclectic paradigm” which was presented as, and remains, a theory of international production. The theory has now passed its silver anniversary, and this article seizes the opportunity to give the paradigm a routine check. Dunning’s hits and misses are counted, and the conclusion suggests that the usual accusations of over-ambitiousness may be modified in that, in at least one sense, Dunning is underambitious. The eclectic theory might, from the outset, have been presented as a far more general theory of internationalization, thus anticipating some recent elaborations of the paradigm that have added to its relevance as a strategic tool for multinational corporations.
FOREIGN DIRECT INVESTMENT AND INDUSTRY CHARACTERISTICS:EVIDENCE FROM CHINESE INDUSTRIES
This paper examines empirically the determinants of foreign direct investment (FDI) in Chinese
industry using cross-sectional data. The relationship between industry characteristics and the sectoral distribution of FDI is tested based on different sample groups. A test for endogeneity justifies the use of two-stage least square estimation in order to avoid inconsistent results. The evidence suggests that FDI in Chinese industries is significantly influenced by the market size, exports, firm size and the policy towards FDI. The findings from this study generate important policy implications regarding how governments can encourage FDI into technology-intensive industries.
THE LOW COST, DIFFERENTIATION, AND FOCUS/NICHE STRATEGIES OF AMERICAN, JAPANESE, AND BRITISH COMPANIES OPERATION IN THE UNITED STATES: A COMPARATIVE STUDY
Abhay Shah, Charles Zeis, Hailu Regassa and Ahmad Ahmadian
This paper reports the findings of a study that investigates the differences between Japanese, British and American companies (that are operating in the United States) in how they use Porter’s generic strategies of low cost, differentiation, and focus/niche. Specifically, the study addresses the following issues: (1) What constitutes the three different generic strategies of low cost, differentiation and focus/niche? (2) Do American, Japanese, and British companies use different generic strategies in order to gain competitive advantage?
THE INTERACTION EFFECT OF DIVERSIFICATION STRATEGY, ENTRY MODE, AND IMPLEMENTATION MECHANISM ON CORPORATE PERFORMANCE: THE KOREA CASE
This paper analyzes the effect that the implementation mechanism of a diversification strategy and mode has on business performance. More specifically, it examines the interaction effects of diversification strategy, mode and implementation on business performance, with a view to figuring out the optimal combination of the three factors of diversification. The result of this study indicates that different diversification strategies and modes require different implementation mechanisms and that only the most relevant combination of the three factors can create the highest performance.
INTERNATIONAL BUSINESS ACTIVITY AND FIRM VALUE: THE IMPACT OF OWNERSHIP AND CAPITAL STRUCTURE
Theoretically, the effect of international business activity on firm value depends on ownership and capital structure. Companies may over-invest in international business activity because of agency problems or under-invest, if they are capital-rationed. This paper examines how these competing hypotheses fit a sample of 237 very large European and US companies over the period 1991-1997. The results indicate that internationalization may sometimes destroy value from a shareholder viewpoint and that financial leverage may have a negative effect on value creation by internationalization whereas the effects of ownership concentration on value gains from internationalization were found to depend on system effects. However, the magnitude of the effects is small, and the results were found to be sensitive to estimation methods.
MODELING COUNTRY-SPECIFIC RISKS IN FOREIGN INVESTMENT USING AN EXPERT-DRIVEN SYSTEM
Aboubaker Seddik Meziani
Assuming that regulatory obstacles such as capital controls, breach of contract, and other market imperfections are still predominant even in today’s increasingly integrated financial markets, this study demonstrates application of the analytic hierarchy process (AHP) to effectively assess country-specific risks to cross-border investments. The AHP is an expert-driven system that has been applied to numerous fields but has yet to be applied to the assessment and management of country-risk exposure. This study shows that it is also capable of selecting an optimal host country (OHC) for a foreign investment, herein a national market where country-specific risks are least likely to adversely affect its return.
INHIBITORS AND ENHANCERS: THE ROLE OF INTERNAL AND EXTERNAL STAKEHOLDERS IN THE TRANSITION PROCESS
Ben L. Kedia, C. Clay Dibrell and Paula D. Harveston
Since several transition economies faltered after promising starts in the early 1990s, researchers should consider the role of inhibiting and enhancing stakeholders in relation to a developing nation’s political and economic ideologies. We suggest that the role of stakeholders, specifically internal stakeholders, have largely been ignored in the privatization and economic liberalization processes involved in transition economies. These stakeholders should be examined further, as they often act as inhibitors to economic progress rather than enhancers in countries attempting to move from command to market economies.