How Emerging Market Governments Promote Outward Fdi: Experience from China

Journal of World Business 45 (2010) 68–79

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Journal of World Business

journal homepage: www.elsevier.com/locate/jwb

How emerging market governments promote outward FDI: Experience from China§

Yadong Luo a,*, Qiuzhi Xue b, Binjie Han c

a

Department of Management, School of Business Administration, University of Miami, 414 Jenkins Building, Coral Gables, FL 33124-9145, USA Department of Management, School of Management, Fudan University, Shanghai, China c Shanghai Stock Exchange, Shanghai, China

b

A R T I C L E I N F O

A B S T R A C T

Keywords: Outward FDI Government policies Emerging markets China

Large scale outward foreign direct investment (OFDI) by emerging market enterprises has become common in today’s business world. Nested within the political economy perspective, this article elucidates why and how emerging market governments enthusiastically stimulate OFDI. Drawing upon our detailed analysis of the Chinese context, we developed the logic that OFDI promotion policies set by emerging market governments are economically imperative and institutionally complementary to offsetting competitive disadvantages of emerging market enterprises in global competition. This study presents the governmental institutions that impact Chinese OFDI, discusses evolutionary changes of OFDI policies, and describes current policies and measures that stimulate Chinese companies to expand into the global market. This article concludes with theoretical and managerial discussions wherein we call for convergence between two seemingly paradoxical views – institutional escapism and governmental promotion – presently used as an institutional logic explicating international expansion of emerging market enterprises. ß 2009 Elsevier Inc. All rights reserved.

1. Introduction Outward foreign direct investment (OFDI) by emerging market enterprises (EMEs) has become increasingly noteworthy and prevalent in recent years....