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”
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
Jane Lu, City University of Hong Kong, China
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.
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).
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.
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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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 .