Share:


Host government digitalization and Chinese OFDI entry mode choice: green-field investment vs cross-border M&A

    Xiaoge Li Affiliation
    ; Guangqin Li Affiliation
    ; Xin Li Affiliation

Abstract

Based on a theoretical framework based on the perspectives of open governance, transparent governance, and smart governance, the article comprehensively explains the potential impact of host country government digitalization on Chinese enterprises’ OFDI entry mode selection. The results indicate that host government digitalization significantly promotes the probability of Chinese enterprises investing by greenfield investment mode; After using instrumental variable to eliminate endogenous interference and undergoing a series of robustness checks, this conclusion remains robust; Host government digitalization influences the OFDI mode choices of Chinese enterprises by suppressing corruption and strengthening intellectual property protection. Based on the research conclusions, we put forward policy suggestions on “how Chinese enterprises should make OFDI entry mode decision and optimize the project management after entry based on the level of host government digitalization“.


First published online 02 April 2025

Keyword : government digitalization, OFDI entry mode choice, green-field investment, cross-border M&A

How to Cite
Li, X., Li, G., & Li, X. (2025). Host government digitalization and Chinese OFDI entry mode choice: green-field investment vs cross-border M&A. Technological and Economic Development of Economy, 1-30. https://doi.org/10.3846/tede.2025.22519
Published in Issue
Apr 2, 2025
Abstract Views
16
PDF Downloads
7
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Adams, S. (2010). Intellectual property rights, investment climate and FDI in developing countries. International Business Research, 3(3), 201–209. https://doi.org/10.5539/ibr.v3n3p201

Agarwal, S. (1994). Socio-cultural distance and the choice of joint ventures: A contingency perspective. Journal of International Marketing, 2(2), 63–80. https://doi.org/10.1177/1069031X9400200205

Al-Azzam, A., & Abu-Shanab, E. (2014, March 26–27). E-government: The gate for attracting foreign investments. In Proceedings of the 2014 6th International Conference on Computer Science and Information Technology (CSIT) (pp. 161–165). Amman, Jordan. IEEE. https://doi.org/10.1109/CSIT.2014.6805995

Almor, T. (2018). International investment strategies utilized by international new ventures: The role of exogenous and endogenous uncertainty. International Studies of Management & Organization, 48(2), 140–156. https://doi.org/10.1080/00208825.2018.1443736

Alon, I., Elia, S., & Li, S. (2020). Greenfield or M&A? An institutional and learning perspective on the establishment mode choice of Chinese outward investments. Journal of International Management, 26(3), Article 100758. https://doi.org/10.1016/j.intman.2020.100758

Amendolagine, V., Crescenzi, R., & Rabellotti, R. (2024). The geography of acquisitions and greenfield investments: Firm heterogeneity and regional institutional conditions. Journal of Regional Science, 64(4), 1476–1505. https://doi.org/10.1111/jors.12705

Andersen, T. B. (2009). E-Government as an anti-corruption strategy. Information Economics and Policy, 21(3), 201–210. https://doi.org/10.1016/j.infoecopol.2008.11.003

Anderson, J., & Sutherland, D. (2015). Entry mode and emerging market MNEs: An analysis of Chinese greenfield and acquisition FDI in the United States. Research in International Business and Finance, 35, 88–103. https://doi.org/10.1016/j.ribaf.2015.03.008

Arslan, A., & Larimo, J. (2011). Greenfield investments or acquisitions: Impacts of institutional distance on establishment mode choice of multinational enterprises in emerging economies. Journal of Global Marketing, 24(4), 345–356. https://doi.org/10.1080/08911762.2011.602323

Bartik, T. J. (1991). Who benefits from state and local economic development policies? W. E. Upjohn Institute for Employment Research. https://doi.org/10.17848/9780585223940

Blackburn, K., & Forgues-Puccio, G. F. (2009). Why is corruption less harmful in some countries than in others? Journal of Economic Behavior & Organization, 72(3), 797–810. https://doi.org/10.1016/j.jebo.2009.08.009

Bonaglia, F., Goldstein, A., & Mathews, J. A. (2007). Accelerated internationalization by emerging markets’ multinationals: The case of the white goods sector. Journal of World Business, 42(4), 369–383. https://doi.org/10.1016/j.jwb.2007.06.001

Bonaime, A., Gulen, H., & Ion, M. (2018). Does policy uncertainty affect mergers and acquisitions? Journal of Financial Economics, 129(3), 531–558. https://doi.org/10.1016/j.jfineco.2018.05.007

Brada, J. C., Drabek, Z., & Perez, M. F. (2012). The effect of home‐country and host‐country corruption on foreign direct investment. Review of Development Economics, 16(4), 640–663. https://doi.org/10.1111/rode.12009

Brouthers, K. D., & Hennart, J.-F. (2007). Boundaries of the firm: Insights from international entry mode research. Journal of Management, 33(3), 395–425. https://doi.org/10.1177/0149206307300817

Buckley, P. J., & Casson, M. C. (1998). Analyzing foreign market entry strategies: Extending the internalization approach. Journal of International Business Studies, 29, 539–561. https://doi.org/10.1057/palgrave.jibs.8490006

Buckley, P. J., Cross, A. R., Tan, H., Xin, L., & Voss, H. (2008). Historic and emergent trends in Chinese outward direct investment. Management International Review, 48(6), 715–748. https://doi.org/10.1007/s11575-008-0104-y

Buckley, P. J., Yu, P., Liu, Q., Munjal, S., & Tao, P. (2016). The institutional influence on the location strategies of multinational enterprises from emerging economies: Evidence from China’s cross-border mergers and acquisitions. Management and Organization Review, 12(3), 425–448. https://doi.org/10.1017/mor.2016.21

Bureau van Dijk. (n.d.). Osiris. https://osiris-r1.bvdinfo.com/version-20240405-2-4/home.serv?product=OsirisNeo&

Chen, V. Z., Li, J., & Shapiro, D. M. (2012). International reverse spillover effects on parent firms: Evidences from emerging-market MNEs in developed markets. European Management Journal, 30(3), 204–218. https://doi.org/10.1016/j.emj.2012.03.005

Daamen, B., Hennart, J. F., Kim, D.-J., & Park, Y.-R. (2007). Sources of and responses to the liability of foreignness: The case of Korean companies in the Netherlands. Global Economic Review, 36(1), 17–35. https://doi.org/10.1080/12265080701217165

Deng, P. (2009). Why do Chinese firms tend to acquire strategic assets in international expansion? Journal of World Business, 44(1), 74–84. https://doi.org/10.1016/j.jwb.2008.03.014

Dunning, J. H. (1977). Trade, location of economic activity and the MNE: A search for an eclectic approach. In B. Ohlin, P. O. Hesselborn, & P. M. Wijkman, (Eds.), The International allocation of economic activity (pp. 395–418). Palgrave Macmillan. https://doi.org/10.1007/978-1-349-03196-2_38

Egger, P., & Winner, H. (2005). Evidence on corruption as an incentive for foreign direct investment. European Journal of Political Economy, 21(4), 932–952. https://doi.org/10.1016/j.ejpoleco.2005.01.002

Elbahnasawy, N. G. (2014). E-government, internet adoption, and corruption: An empirical investigation. World Development, 57, 114–126. https://doi.org/10.1016/j.worlddev.2013.12.005

Elia, S., Kafouros, M., & Buckley, P. J. (2020). The role of internationalization in enhancing the innovation performance of Chinese EMNEs: A geographic relational approach. Journal of International Management, 26(4), Article 100801. https://doi.org/10.1016/j.intman.2020.100801

Estrin, S., Baghdasaryan, D., & Meyer, K. E. (2009). The impact of institutional and human resource distance on international entry strategies. Journal of Management Studies, 46(7), 1171–1196. https://doi.org/10.1111/j.1467-6486.2009.00838.x

Gatignon, H., & Anderson, E. (1988). The multinational corporation’s degree of control over foreign subsidiaries: An empirical test of a transaction cost explanation. The Journal of Law, Economics, and Organization, 4(2), 305–336.

Goel, G., & Tripathi, R. (2007). E-government approach to management of intellectual property in Indian folklore. Foundations of E-government, (1), 302–312.

Habib, M., & Zurawicki, L. (2002). Corruption and foreign direct investment. Journal of International Business Studies, 33, 291–307. https://doi.org/10.1057/palgrave.jibs.8491017

Hennart, J.-F., & Park, Y.-R. (1993). Greenfield vs. acquisition: The strategy of Japanese investors in the United States. Management Science, 39(9), 1054–1070. https://doi.org/10.1287/mnsc.39.9.1054

Hill, C. W., & Kim, W. C. (1988). Searching for a dynamic theory of the multinational enterprise: A transaction cost model. Strategic Management Journal, 9(S1), 93–104. https://doi.org/10.1002/smj.4250090710

Hong, E., & Sun, L. (2006). Dynamics of internationalization and outward investment: Chinese corporations’ strategies. The China Quarterly, 187, 610–634. https://doi.org/10.1017/S0305741006000403

Johanson, J., & Vahlne, J. E. (1977). The internationalization process of the firm – A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8, 23–32. https://doi.org/10.1057/palgrave.jibs.8490676

Kachwamba, M. (2011). Impact of e-government on transaction cost and FDI inflows: A proposed conceptual framework. International Journal of Business and Management, 6(11), 285–296. https://doi.org/10.5539/ijbm.v6n11p285

Kim, S., Kim, H. J., & Lee, H. (2009). An institutional analysis of an e-government system for anti-corruption: The case of OPEN. Government Information Quarterly, 26(1), 42–50. https://doi.org/10.1016/j.giq.2008.09.002

Kim S.-B., & Kim, D. (2020). ICT implementation and its effect on public organizations: The case of digital customs and risk management in Korea. Sustainability, 12(8), Article 3421. https://doi.org/10.3390/su12083421

Klitgaard, R. (1991). Controlling corruption. University of California Press.

Kronborg, D., & Thomsen, S. (2009). Foreign ownership and long-term survival. Strategic Management Journal, 30(2), 207–219. https://doi.org/10.1002/smj.732

Layne, K., & Lee, J. (2001). Developing fully functional e-government: A four-stage model. Government Information Quarterly, 18(2), 122–136. https://doi.org/10.1016/S0740-624X(01)00066-1

Li, J., Li, Y., & Shapiro, D. (2012). Knowledge seeking and outward FDI of emerging market firms: The moderating effect of inward FDI. Global Strategy Journal, 2(4), 277–295. https://doi.org/10.1111/j.2042-5805.2012.01042.x

Li, Y., Zhang, B., Fan, D., & Li, Z. (2021). Digital media, control of corruption, and emerging multinational enterprise’s FDI entry mode choice. Journal of Business Research, 130, 247–259. https://doi.org/10.1016/j.jbusres.2021.03.006

Luo, Y., & Tung, R. L. (2007). International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies, 38, 481–498. https://doi.org/10.1057/palgrave.jibs.8400275

Lupu, D., & Lazăr, C. G. (2015). Influence of e-government on the level of corruption in some EU and non-EU states. Procedia Economics and Finance, 20, 365–371. https://doi.org/10.1016/S2212-5671(15)00085-4

Mahmoodi, R. K., & Nojedeh, S. H. (2016). Investigating the effectiveness of e-government establishment in government organizations. Procedia – Social and Behavioral Sciences, 230, 136–141. https://doi.org/10.1016/j.sbspro.2016.09.017

Mathews, J. A. (2006). Dragon multinationals: New players in 21st century globalization. Asia Pacific Journal of Management, 23, 5–27. https://doi.org/10.1007/s10490-006-6113-0

Meyer, K. E., Estrin, S., Bhaumik, S. K., & Peng, M. W. (2009). Institutions, resources, and entry strategies in emerging economies. Strategic Management Journal, 30(1), 61–80. https://doi.org/10.1002/smj.720

Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics & State Administration of Foreign Exchange. (2022) Statistical Bulletin of China’s Outward Foreign Direct Investment. https://images.mofcom.gov.cn/hzs/202310/20231007152406593.pdf

Mohamed, Z., Nadzri, F. A. A., Qureshi, S. F., Al-Dhubaibi, A. A. S., Arifin, J., & Yacob, N. (2020). Attracting inward foreign direct investment: An analysis on e-government practices and ease of doing business among countries in the ASEAN region. Contemporary Economics, 14(4), 532–542.

Morck, R., Yeung, B., & Zhao, M. (2008). Perspectives on China’s outward foreign direct investment. Journal of International Business Studies, 39(3), 337–350. https://doi.org/10.1057/palgrave.jibs.8400366

Nguyen, N. H., & Phan, H. V. (2017). Policy uncertainty and mergers and acquisitions. Journal of Financial and Quantitative Analysis, 52(2), 613–644. https://doi.org/10.1017/S0022109017000175

Nicholson, M. W. (2007). The impact of industry characteristics and IPR policy on foreign direct investment. Review of World Economics, 143, 27–54. https://doi.org/10.1007/s10290-007-0097-9

Peng, M. W. (2002). Towards an institution – Based view of business strategy. Asia Pacific Journal of Management, 19, 251–267. https://doi.org/10.1023/A:1016291702714

Peng, M. W. (2006). Making M&A fly in China. Harvard Business Review, 84(3), 26–27.

Prasetyo, B., & Susanto, T. D. (2017). The relationship analysis of e-government implementation on increasing capital investment in region (Case study: Banyuwangi city). The Journal of Engineering, 3(1), 17–21. https://doi.org/10.12962/joe.v3i1.2267

Rienda, L., Claver, E., & Quer, D. (2013). The internationalization of Indian multinationals: Determinants of expansion through acquisitions. Journal of the Asia Pacific Economy, 18(1), 115–132. https://doi.org/10.1080/13547860.2012.742705

Rugman, A. M. (1985). Internalization is still a general theory of foreign direct investment. Weltwirtschaftliches Archiv, 121(3), 570–575. https://doi.org/10.1007/BF02708194

Rui, H., & Yip, G. S. (2008). Foreign acquisitions by Chinese firms: A strategic intent perspective. Journal of World Business, 43(2), 213–226. https://doi.org/10.1016/j.jwb.2007.11.006

China Stock Market & Accounting Research Database. (n.d.). https://data.csmar.com/

Shim, D. C., & Eom, T. H. (2008). E-government and anti-corruption: Empirical analysis of international data. International Journal of Public Administration, 31(3), 298–316. https://doi.org/10.1080/01900690701590553

Subasat, T., & Bellos, S. (2011). Economic freedom and foreign direct investment: A panel gravity model approach. The Empirical Economics Letters, 10(7), 697–704.

Tanaka, H., & Iwaisako, T. (2014). Intellectual property rights and foreign direct investment: A welfare analysis. European Economic Review, 67, 107–124. https://doi.org/10.1016/j.euroecorev.2014.01.013

Schwab, K., Zahidi, S., & The World Economic Forum. (2020). Global competitiveness report special edition 2020: How countries are performing on the road to recovery. https://cn.weforum.org/publications/the-global-competitiveness-report-2020/

Ti, L.-L., Ng, B.-K., & Rasiah, R. (2023). Motivations behind SME greenfield investment in emerging markets. Management Decision, 61(6), 1656–1676. https://doi.org/10.1108/MD-04-2022-0482

Twizeyimana, J. D., & Andersson, A. (2019). The public value of e-government digitalization – A literature review. Government Information Quarterly, 36(2), 167–178. https://doi.org/10.1016/j.giq.2019.01.001

United Nations. (n.d.). United Nations E-Government Survey. https://doi.org/10.18356/237d52b2-en

Wei, S. J. (2000). How taxing is corruption on international investors? Review of Economics and Statistics, 82(1), 1–11. https://doi.org/10.1162/003465300558533

Wen, Z., & Ye, B. (2014). Analyses of mediating effects: The development of methods and models. Advances in Psychological Science, 22(5), 731–745. https://doi.org/10.3724/SP.J.1042.2014.00731

Williamson, O. E. (1975). Markets and hierarchies: Analysis and antitrust implications: A study in the economics of internal organization. University of Illinois at Urbana-Champaign’s Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship. SSRN. https://ssrn.com/abstract=1496220

World Bank. (n.d.-a). Worldwide Governance Indicators. https://www.worldbank.org/en/publication/worldwide-governance-indicators

World Bank. (n.d.-b). World Bank development indicators. https://data.worldbank.org/indicator

Xie, Q., & Yin, H. (2023). Institutional differences and the choice of outward foreign direct investment mode under the “Belt and Road” initiative: Experience analysis based on China’s manufacturing enterprises. Sustainability, 15(9), Article 7201. https://doi.org/10.3390/su15097201

Xie, Q., & Yin, H. (2024). Business environment and the choice of entry mode of OFDI: Evidence from China. Journal of Asian Economics, 92, Article 101717. https://doi.org/10.1016/j.asieco.2024.101717

Xu, D., & Shenkar, O. (2002). Institutional distance and the multinational enterprise. Academy of Management Review, 27(4), 608–618.

Yan, Y.-C., & Lyu, S.-J. (2023). Can e-government reduce local governments’ financial deficits? Analysis based on county-level data from China. Government Information Quarterly, 40(3), Article 101812. https://doi.org/10.1016/j.giq.2023.101812

Yin, M., Sheng, L., & Li, W. (2018). Executive incentives, innovation input, and firm performance: An industry-based empirical study from an endogeneity perspective. Nankai Business Review, 21(1), 109–117.

Yiu, D., & Makino, S. (2002). The choice between joint venture and wholly owned subsidiary: An institutional perspective. Organization Science, 13(6), 667–683. https://doi.org/10.1287/orsc.13.6.667.494

Yoo, D., & Reimann, F. (2017). Internationalization of developing country firms into developed countries: The role of host country knowledge-based assets and IPR protection in FDI location choice. Journal of International Management, 23(3), 242–254. https://doi.org/10.1016/j.intman.2017.04.001

Young, M. N., Peng, M. W., Ahlstrom, D., Bruton, G. D., & Jiang, Y. (2008). Corporate governance in emerging economies: A review of the principal – Principal perspective. Journal of Management Studies, 45(1), 196–220. https://doi.org/10.1111/j.1467-6486.2007.00752.x

Zaheer, S., & Mosakowski, E. (1997). The dynamics of the liability of foreignness: A global study of survival in finan-cial services. Strategic Management Journal, 18(6), 439–463. https://doi.org/10.1002/(SICI)1097-0266(199706)18:6<439::AID-SMJ884>3.0.CO;2-Y

Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341–363.

Zhang, J., Zhou, C., & Ebbers, H. (2011). Completion of Chinese overseas acquisitions: Institutional perspectives and evidence. International Business Review, 20(2), 226–238. https://doi.org/10.1016/j.ibusrev.2010.07.003