Multi-Level State Capitalism: Chinese State-Owned Business Groups

Jakob Arnoldi, Anders Ryom Villadsen, Xin Chen, and Chaohong Na

ABSTRACT We argue that vertical interlocks in Chinese state-owned business groups are important mechanisms for coordination and information exchange between the apex firm and affiliated firms, and that they are also mechanisms for government owners of the business groups to exercise control. By combining resource dependence theory with elements from transaction cost economics and agency theory, we propose that the need for interlocks increases the higher the level of government ownership. The central government is therefore more likely to use vertical interlocks than the provincial governments, which again are more likely to use vertical interlocks than the municipal governments. We develop three hypotheses based on these arguments. A regression analysis of a hand-collected data set finds strong support for our hypotheses. Our result sheds light on coordination and governance issues within the state-owned sector in China and on an important means for mitigating these issues used by the government owners and firms affiliated with state-owned groups.

KEYWORDS  business groups, China, government, interlocks

Comparative Network Research in China

Ronald S. Burt and Bat Batjargal

ABSTRACT Using recent substantive results on China and the West, we highlight some virtues to Mill’s method of residues for comparative network research. The result is research that combines the emic-etic approaches discussed by Leung (2009) with the spirit of Whetten’s (2009: 49) efforts to make ‘theory borrowing more context sensitive’. We draw on recent comparative research about the competitive advantage enjoyed by network brokers, trust facilitated by embedding a relationship in a closed network, the subset of Chinese relations that constitute guanxi, the idea of American and European guanxi, different business environments maintained by the same network mechanism, cocoon networks, small-world networks, the longer history apparent in Chinese networks, and job search via colleagues, friends, and family. We also illustrate the value of data graphs for the expository value of the method of residuals in comparative network analyses.

KEYWORDS: business strategy, Chinese management, entrepreneurship, network analysis, organizational theory, private-owned enterprises, social networks

A Delicate Balance for Innovation: Competition and Collaboration in R&D Consortia

Dong Chen, Li Dai, and Donghong Li

ABSTRACT This study examines how competitive and cooperative relationships within R&D consortia influence member firms’ innovation output. We propose a U-shaped relationship between the presence of market competitors for a member firm and the firm’s joint R&D output with other consortium members and examine how the relationship is mediated by interactions with other members at the firm level and moderated by collaborative efforts at the consortium level. Using a unique sample of 320 firms from 52 R&D consortia in China, we find support for our predictions. This multi-level study extends our understanding of competition and cooperation in multi-party networks and provides insights for creating a balance between the two forces that is conducive to innovation.

KEYWORDS:competition, cooperation, R&D consortia, innovation

Subsidiary Networks and Foreign Subsidiary Performance: A Coopetition Perspective

Yang Liu, Jie Jiao, and Jun Xia

ABSTRACT From a coopetition perspective, we differentiate between a multinational enterprise’s product-similar subsidiary network and product-different subsidiary network in a host country. We argue that the product-similar network will have a curvilinear (inverted U-shaped) effect on foreign subsidiary performance, whereas the product-different network will produce a monotonic (positive) effect. Moreover, we introduce host-country economic advantage and intangible resource of the subsidiary as moderators into the relationship between subsidiary network and performance. Using longitudinal panel data of foreign subsidiaries, we find evidence that when host-country economic advantage is large, and the level of intangible asset intensity is high, the inverted U-shaped effect of product-similar subsidiary network is less pronounced. Moreover, host-country economic advantage and intangible asset intensity both enhance the positive effect of product-different subsidiary network. However, the moderating effect of intangible asset intensity is opposite to our prediction.

KEYWORDS coopetition, host-country economic advantage, intangible asset intensity, subsidiary network, subsidiary performance

The Metropolitan Effect: Colonial Influence on the Internationalization of Francophone African Firms

Tah Ahmed Meouloud, Ram Mudambi, and TL Hill

ABSTRACT Drawing on the experience of firms of various sizes from Francophone Africa, we explore how the internationalization trajectories of frontier economy firms may vary from those predicted by theory. The firms studied followed social, linguistic, cultural, and institutional gradients to internationalize first to France, rather than to neighboring countries, and did so in search of not only markets and resources but also legitimacy. In turn, the sales, resources, and legitimacy acquired in France supported further international expansion, sometimes even to neighboring countries. Although our insights derive from the experience of Francophone firms from Africa, we argue that for firms from all former colonies, the internationalization trajectory leads through the colonial center. Our findings underline the roles of legitimacy-seeking and network ties in the internationalization of frontier market firms and serve as a salutatory reminder of the lingering influence of colonial ties on international business.

KEYWORDS: expatriate management, foreign market entry, international strategy, legitimacy, social networks

The Effect of European Intellectual Property Institutions on Chinese Outward Foreign Direct Investment

Nikolaos Papageorgiadis, Yue Xu, and Constantinos Alexiou

ABSTRACT This study examines the role of the strength of the Intellectual Property (IP) institutions of 23 European countries in attracting Chinese Outward Foreign Direct Investment (OFDI) during the time period 2003–2015. Following a dynamic panel data analysis methodology, we find that the strength of IP institutions has a positive effect in attracting higher levels of OFDI from China. This is an important finding for the OFDI literature from emerging markets, since previous studies have researched this relationship from the OFDI perspective of developed countries. However, we also find a weak indication of a potential U-shaped relationship between the strength of IP institutions and Chinese OFDI. To better understand this relationship, we interact a European country’s membership in the Former Eastern Bloc (FEB) with the strength of IP institutions and find a negative moderating effect. We therefore find that when investing in FEB countries, Chinese firms are attracted to weaker levels of IP institutional strength. The results of this study have important implications for future studies on the determinants of OFDI from emerging markets, as well as for European and Chinese businesses and policy-makers concerning the importance of IP institutional strength.

KEYWORDS: China, Europe, institutions, intellectual property, OFDI