Survey of Multinational Enterprises in China
Program Director - Professor Stephen Nicholas
Centre for Property Rights, Shandong University, China
Business School, Jilin University, China
In cooperation with Shandong and Jilin universities, this project analyses four core areas of multinational firm activity in China.
FDI Decision: Ownership Advantages and the Re-investment Decision
Using survey questionnaires, the project examines the ownership advantages (product and process technology, work and managerial practices, advertising, marketing and distribution skills, brand name and parent reputation advantages) transferred to China. These firm-specific assets define the knowledge base of the MNE, determining the trade-off between integrated production and national responsiveness.
The project studies not only investment, but also reinvestment, in terms of the volume and direction of resource flows among all the countries in which the MNE operates, and the resulting information flows. The survey will also investigate traditional location factors (market size, income levels, energy and labour costs); follow-the-leader strategies; government policy (trade, competition and industry policy); and performance (profitability and productivity).
Parent-Subsidiary Control and Decision-Making
There is widespread recognition that modes of control and coordination, including the locus of decision making, have changed over the past decade. MNEs are increasingly supplementing formal or structural modes of parent-subsidiary control (e.g. formal target setting) with informal mechanisms of coordination (e.g. contacts and meetings between managers; managerial transfer and mobility across business units). At the same time there has been an upgrading of the role of subsidiaries.
These developments connect with the large literature on multinational organisational design, which denote a 'new management mentality' rather than a specific set of concrete practices or arrangements. The project will address the nature of parent-subsidiary relations and the locus of decision making, including co-ordinated networks and vertical control.
There are several foci to supplier relations. First, to what extent does Chinese experience supplier FDI, with home supplier firms following home buyer firms to Chinese? Second, to what extent do foreign MNEs transfer home market supplier relations to Chinese suppliers. Third, what impact does size, industry, ownership and experience, and not simply nationality, have on the structure of supplier relations.
To address each of these questions, the survey will investigate the MNEs relationship with Chinese and non-Chinese (including intra-firm) suppliers: the source of raw material, components, finished goods and capital equipment; types of inputs; basis of sourcing decisions (quality, price, local content rules); relationship contracting; and supplier performance. These questions allow the globalisation of supplier relations to be measured.
The project studies learning and knowledge transfer. Specifically, the survey will investigate how subsidiaries transfer know-how from and to t heir parents, including how this transfer creates learning capacity in the subsidiary. The impact of Chinese domestic firms on the subsidiary are also studied.
The studies of foreign direct investment in Shandong and Jilin provinces will allow comparisons to be made on the different impacts of geography, province government policies and timing of investment between two industrialising Chinese provinces.
Second, the project will provide policy-makers with new data and interpretations of foreign investment to improve the policy environment for international firms in China.