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*Journal of World Business*



*A Special Issue on*

*“From “Bring In” to “Go Global”: Learning and Innovation of Chinese Firms
along the Path of Inward and Outward Internationalization”*





Guest Co-Editors:

Marjorie A. Lyles, Florida International University, USA

Eric W. K. Tsang, University of Texas at Dallas, USA

Shenxue Li, University of Kent, UK

Jacky F. L. Hong, University of Macau, China

Fang Lee Cooke, Monash University, Australia



*Supervising Editor: *

Jane Lu, City University of Hong Kong, China



Overview



Over the past several decades, the “Bring In” and “Go Global” policies
implemented in China have encouraged an unprecedented level of investment
in and out of the country, creating unique opportunities for Chinese firms
to learn and innovate along the path of inward and outward
internationalization. The international business (IB) literature has yet to
fully explain what has been learnt by the Chinese firms and whether and how
their learning and innovation have taken place over time. This Special
Issue aims to examine the specific content, nature, mechanisms, processes,
and internal and external conditions and contexts of learning and
innovation of Chinese firms during the course of inward and outward
internationalization.



Background



Most countries have made policy efforts to attract inward foreign
investment, but few have set clear strategies aimed at promoting outward
foreign investment (UNCTAD, 2018). China has been an exceptional case such
that its government policies attach significant weight to both inward and
outward foreign investment (MOFCOM, 2017; Zhang, 2006). Since the
initiation of economic reforms in 1978, China has implemented its “Bring
In” policy, an opening up to inward foreign investment approach with policy
measures favourable to foreign investors, *inter alia*, tax incentives,
liberalized entry conditions in a number of industries, opening up coastal
cities (OCCs) and the establishment of special economic zones (SEZs) (Zhou,
Delios, & Yang, 2002). In the mid-1990s, China proposed its “Go Global”
policy, also referred to as “Go Out” strategy, as part of its national
strategy for further participation in international markets, in conjunction
with the “Bring In” policy (MOFCOM, 2017). Since then, the “Go Global”
strategy has encouraged many Chinese firms to acquire strategic foreign
assets and gain greater access to foreign markets (Deng, 2009; Luo & Tung,
2018; Rui & Yip, 2008).



The rationale for “Bring in” and “Go Global” policies is clear. Both
policies are seen as crucial in supporting Chinese economic sectors to move
up the innovation value chain. International economic research has long
established models of endogenous innovation-driven growth, emphasizing the
role of foreign investment as an important channel for technological
knowledge flows across national borders (Findly, 1978; Grossman & Helpman,
1991; Rivera-Batiz & Romer, 1991). Inward foreign investment has been
perceived as an important source of technology and knowledge spillovers by
offering host market opportunities, particularly those of developing
countries (Blomström & Kokko, 1998; Cantwell, 2009; Caves, 1974). Inward
foreign investment has played an important role in industrial modernization
and rapid and sustained economic development of China. Between 1978 and
2017, China’s GDP grew at an average rate exceeding 9 per cent annually,
compared with a growth rate of 2.9 per cent for the global economy (EY,
2018). It is well understood that China has relied on this policy to learn
from foreign investors and develop its key industries, though foreign firms
are still not allowed to invest in a number of sectors.



The “Go Global” strategy, while catering for the needs of the Chinese
government (Child & Rodrigues, 2005), has provided a platform for those
Chinese enterprises with comparative advantages to gain access to advanced
technology, managerial capabilities and new markets, and to enhance their
brand recognition and competitiveness in international markets (MOFCOM, 2017).
The growing volume of research on emerging market multinational enterprises
(EM MNEs) emphasizes the role of outward foreign investment as a
springboard to aggressively acquire critical resources and capabilities
needed to innovate and establish their competitive positions at home and
globally (Deng, 2009; Kumar et al., 2019; Luo & Bu, 2018; Luo & Tung, 2007;
2018; Rui & Yip, 2008). Buckley and colleagues (2007) observed that Chinese
investors often choose to enter foreign markets with rich technological
endowments. The effects of Chinese outward investment on home market
productivity are often contingent upon the level of technology gap between
home and host countries (Li et al, 2016). A wider gap suggests the
potential for significant productivity spill over effects.



While China continues its focus on “Bring In”, the government has attached
more importance to “Go Global” in recent years by providing financial
support and incentives. As a result, Chinese outbound direct investment
(ODI) had reached to over US$1.9 trillion by the end of 2018, making
it the second
largest foreign investor in the world (American Enterprise Institute, 2019).
There was also a noticeable improvement in investment quality, that is, an
expansion of investment focus from resources and raw materials to strategic
acquisitions in a range of services (e.g. finance and health care) and
manufacturing sectors that bring complementary benefits to Chinese firms’
core businesses (EY, 2018; Luo, Xue, & Han, 2010).



*Rationale*



The large-scale, policy driven foreign investment in and out of China has
been phenomenal, making the country one of the most suitable contexts for
studying the effects of inward and outward foreign investment on learning
and innovation of domestic and EM MNEs (Li et al., 2016). Whilst there is
little doubt that the “Bring In” and “Go Global” policies have created
unique opportunities for Chinese firms to learn and innovate, the
internationalization literature has yet to fully address the questions of
what has been learnt and whether and how learning and innovation of Chinese
firms have taken place along the path of inward and outward
internationalization. Lyles, Li and Yan (2014) argued that the learning
style of Chinese firms is rather unconventional. For example, the authors
found that half of Chinese MNEs pursue experimental learning, a riskier
explorative approach, suggesting a clear departure from the traditional
incremental learning pattern of internationalization. Indeed, other studies
(Cui & Jiang, 2010; Gaur, Ma, & Ding, 2018; Luo & Bu, 2018) also suggested
that Chinese outward investors with strong strategic asset‐seeking intent,
government support and financial abundance take more risks when entering
and competing in foreign markets. It would be interesting to explore the
mechanisms and processes of their unusual learning approach and the
resulting effects on their innovation and international performance. A
context-speciﬁc theory is thus called for in order to understand
context-specific phenomena arising from important contexts such as China
(Gaur, Ma, & Ding, 2018).



A small number of studies on learning by indigenous Chinese firms have
reported that domestic firms often acquire knowledge of foreign MNEs
through their involvement in the supply chain (Duanmu & Fai, 2007) or joint
venturing with these foreign firms (Buckley, Clegg, & Wang, 2006; Kumar et
al., 2019; Tsang, 2001). There have also been observations that reverse
knowledge transfer in cross-border acquisitions of Chinese MNEs relies on
the combined effort of team-based international collaborations and
individual boundary spanners (Liu & Meyer, 2020) and that increased
spending on R&D at home may speed up reverse knowledge transfer and enhance
the ability of Chinese investors to absorb oversea knowledge and innovate.



However, considerable theoretical gaps and methodological limitations
undermine our understanding of learning and innovation behaviour of Chinese
firms. For instance, Duanmu and Fai (2007) cautioned that the learning
pattern identified in their study on Chinese suppliers may suffer from
positive bias in case selection as only MNEs that developed successful
relationships with their Chinese suppliers in a single sector participated
in the research. Buckley, Clegg and Wang (2006) also argued that most
foreign investors have been attracted to higher productivity sectors (e.g.
electronics) in China, suggesting a potential bias towards what has been
observed in prior studies. Knowledge spillover effects are, to a large
extent, determined by host country industry characteristics (Luo & Wang,
2012). As a result, we understand little about to what extent and how
learning and innovation have occurred in lower productivity sectors in
China. Similarly, little research has been undertaken to account for other
contingent factors such as regional differences, subnational institutional
variations, types of domestic firms, institutional, cultural or economic
distance that may have significant influence upon learning and innovation
mechanisms and the resulting effects (Li, Liu, & Qian, 2019; Luo & Wang,
2012; Wu & Ang, 2020; Zhu, Tse, & Li, 2019). Some recent studies (e.g. Luo
& Bu, 2018; Luo & Wang, 2012) suggest that inward foreign investment
connects domestic Chinese firms with companies in advanced economies,
thereby facilitating their experiential learning process prior to their
international expansion. However, little is known about how the learning
channels of inward internationalization link to or complement those of
outward internationalization and, more importantly, what their combined
effects on innovation of Chinese firms are.



Furthermore, extant research predominantly focuses on the acquisition of
technology from companies of advanced economies, paying little, if any,
attention to local knowledge of and learning from companies of less
developed countries. Liu and Meyer (2020) suggested that reverse knowledge
transfer practices of Chinese firms operating in advanced economies may be
different from those of Chinese enterprises doing business in developing
countries. Thus, we know little about how Chinese investors acquire local
market knowledge in order to develop products and employ management skills
suited for less-developed markets. In addition, there have been mentions of
the potential impact of time on learning practices. Given the speed of
China’s economic development over the past four decades, researchers have
recognized the possibility that any research results based on a short
period of time in China may become less relevant for today’s Chinese firms
(Buckley, Clegg, & Wang, 2006; Duanmu & Fai, 2007; Kang & Jiang, 2012).
Longitudinal studies that examine the evolutional patterns of learning and
innovation of Chinese firms along the path of internationalization are
needed.



*Objectives of the Special Issue*



The purpose of this *Journal of World Business* Special Issue is thus
to advance
our understanding of internationalization by examining the specific
content, nature, mechanisms, processes, and internal and external
conditions and contexts of learning and innovation of indigenous Chinese
firms and Chinese MNEs during the course of inward and outward
internationalization. This Special Issue seeks contributions that discover
new mechanisms and processes of learning and innovation of Chinese firms
through inward and outward foreign investment. We also invite submissions
that build on or substantially extend existing research streams on learning
and innovation of Chinese firms, as well as submissions that build upon
multi-disciplinary perspectives, such as international business, strategy,
economics, politics, human resources, marketing, finance, operational
management and organizational studies, to develop a more nuanced
understanding of learning and innovation through inward and outward
internationalization. We are particularly interested in longitudinal
studies that delineate evolutional patterns of learning and innovation over
time and in comparative studies that reveal similarities and differences in
learning and innovation between varying types of Chinese firms operating in
different industries, regions and countries. Cross-cultural studies that
compare and contrast learning and innovation models of Chinese firms and
non-Chinese enterprises are also welcome. All contributions should be
related to learning and innovation of Chinese firms in the context of
inward and outward internationalization.



*Illustrative Topics *



Exemplary research questions within the intended scope of this Special
Issue include, but are not limited to, the following:



*What has been learnt by Chinese firms along the path of inward and outward
internationalization and what is the nature of the resulting innovation?
For example*



·        What types of knowledge of MNEs operating in China are acquired by
indigenous Chinese firms (e.g. Chinese suppliers, joint venture partners,
strategic alliances and other domestic firms) and at which stage of inward
internationalization?

·        What types of knowledge of companies operating outside China are
acquired by Chinese internationalizing firms and at which stage of outward
internationalization?

·        How do different types of knowledge acquired evolve over time?
What types of innovation does the acquired knowledge contribute to?

·        What do Chinese firms learn from outward foreign investment in
less developed countries? How does their learning in those environments
affect their product offerings and management practices?



*What are the mechanisms and processes of learning and innovation employed
by Chinese firms along the path of inward and outward internationalization?
For example*



·        What specific mechanisms and processes are used for acquiring,
transmitting and utilizing different types of knowledge by indigenous
Chinese firms and Chinese MNEs to promote different types of innovation?
How do these mechanisms and processes evolve over time and why?

·        Are the learning and innovation mechanisms and processes of
Chinese firms different from firms of other countries (i.e. advanced
countries, emerging economies, and other developing countries)? If so, what
explains the differences? What are the implications of the differences for
indigenous Chinese firms?

·        What mechanisms and processes are employed by Chinese firms to
mitigate the lack of certain specific knowledge required for realized
innovations?

·        Are the mechanisms and processes through which Chinese firms learn
and innovate during the course of outward internationalization associated
with their approaches for learning and innovation prior to their
international expansion?

·        What are the combined effects of learning and innovation of
Chinese firms through inward and outward investment on their performance
and international competitiveness?

·        How does learning by Chinese firms through international trade
influence how they learn and innovate through inward and outward
investment?



*What are the internal and external factors that enhance or constrain
learning and innovation by Chinese firms along the path of inward and
outward internationalization? For example*



·        How do the learning and innovation models of different types of
Chinese firms (e.g. state-owned, non-state-owned, established, less
established and start-ups) compare and contrast? What explains the
similarities and differences?

·        How do the learning and innovation models of Chinese firms from
different industrial, geographic, subnational institutional, economic and
sub-cultural backgrounds differ? What can specific industrial, regional,
economic, and cultural factors explain the similarities and differences?

·        To what extent and how does learning and innovation occur in lower
productivity sectors?

·        What organizational factors can enhance or constrain learning and
innovation of Chinese firms? Specifically, how do firm-specific
characteristics, such as organizational structure and culture, staffing and
retention policies, levels of existing resources and capabilities, and
management styles and prior experience, of Chinese firms influence their
learning and innovation intent, mechanisms and processes?

·        What international factors enhance or constrain learning and
innovation of Chinese firms? For instance, how does institutional, economic
or cultural distance between China and other countries affect learning and
innovation by Chinese firms from companies of other countries?  Do other
cross-border differences (e.g. differences in industry structure,
technological development, and geographic disparity) affect the intent,
nature, mechanisms and processes of learning and innovation of Chinese
firms?



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*Submission Process*



Between September 1 and September 15, 2020, authors should submit their
manuscripts online via the *Journal of World Business* submission system.
To ensure that all manuscripts are correctly identified for consideration
for this Special Issue, it is important that authors select ‘VSI:
Innovation China’ when they reach the “Article Type” step in the submission
process. Manuscripts should be prepared in accordance with the *Journal of
World Business* Guide for Authors available at

www.elsevier.com/journals/journal-of-world-business/1090-9516/guide-for-authors.
All submitted manuscripts will be subject to the Journal of World
Business’s double-blind review process.





For further information and questions, please contact the corresponding
guest co-editor, Shenxue Li, by [log in to unmask]

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