Chinese OFDI in Australia : drivers and entry modes

Until recently entry mode studies focused largely on the choices made by North American and European firms and entry mode choices of firms from developing countries were largely neglected. In recent years the focus of entry mode research has attempted to remedy this neglect in large part because of the rapid economic growth that has taken place in several emerging economies and, increasingly, the rapid increase in their direct investments in foreign markets. China is perhaps the most frequently investigated case. However, although there are now a limited number of studies looking at the investment motivations and entry mode choices of Chinese investors and their determinants, there has been no detailed study of Chinese OFDI and entry mode choices in regard to Australian markets. This is despite the fact that Australia is a major recipient of Chinese OFDI and has been so for some thirty years. Hence the goal of this study is to remedy this deficiency and, in addition, to throw further light on the determinants of entry mode choice by firms from emerging economies. The study adopts no single theoretical or conceptual framework, given that each has a number of limitations. Instead, it draws upon a range of frameworks, notably Dunning‚ÄövÑvºs eclectic paradigm on firms‚ÄövÑvº internationalisation process (1980 & 1988), the institutional framework (for example, North, 1990; Scott, 1995; Peng, 2002), and the resource-based perspective (for example, Barney, 1991). The thesis, based on a series of case studies, found that Chinese firms invest in Australia for a variety of reasons, including market-seeking, resource-seeking, asset-seeking, as well as a newly identified permanent residency or welfare-seeking motivations. It also found that larger Chinese MNEs with previous international experience preferred to have full control in their Australian affiliates, while those who perceive a high level of scrutiny and constraints imposed by the Australian government upon their investments were prone to choose a shared control mode. The findings of this thesis suggest that a single theoretical perspective is not comprehensive enough to explain OFDI initiated from China into a developed country such as Australia. On a practical level, it may provide some guidance on the internationalisation decisions of those Chinese MNEs who intend to conduct OFDI. In addition, the significant effect government can bring upon towards Chinese MNEs‚ÄövÑvº entry mode decisions as found in this study also signals that thesis is of value to policy makers.