WWW.DISSERTATION.XLIBX.INFO
FREE ELECTRONIC LIBRARY - Dissertations, online materials
 
<< HOME
CONTACTS



Pages:     | 1 | 2 || 4 |

«Chinese FDI strategy in Italy: the ‘Marco Polo’ effect Carlo Pietrobelli* Inter-American Development Bank, 1300 New York Avenue NW, Washington DC ...»

-- [ Page 3 ] --

The existence of a specialised automotive cluster concentrating all different phases of the production process is also behind the decision of two Chinese automotive companies, Jac Anhui Janghuai and Changan, to invest in Turin. In 2004 and 2005, the two companies established R&D and design centres in Turin, where Chinese researchers are working together with their Italian counterparts in strict collaborations with other local specialised firms and research organisations. In both cases, the target is to improve technical know-how, with a particular emphasis on design skills. Both companies are ‘newcomers’ to the global automotive market and see investment in Italy as a rapid and efficient way to improve their capabilities in design and product development. Compared to other possible locations such as Germany or the UK, the Turin cluster offers the advantages of excellent design skills, availability of highly qualified and cheaper human resources and a pool of specialised suppliers for outsourcing a wide range of activities including engineering, modelling, prototyping and mathematical analysis and calculation.

Among the motivations for investing in Italy, the managers interviewed also stressed the need to escape the rising competitive pressure in the Chinese market, which has become overcrowded, given the presence of numerous global players. Chinese carmakers share 25% of their home market, and have started looking abroad - first exporting, then producing in developing countries (e.g., in Latin America and East Asia) and, more recently trying to acquire new strategic assets by investing in more sophisticated markets.

This, however, does not imply that they plan to produce for the European market in the short run, but rather they are looking for new competences to catch up with the global players or pursue specialisation in niche markets (Amighini, 2008).

Other relevant strategic asset-seeking investments are those aimed at the acquisition of well-known brands. This is a strategy followed by many emerging country MNEs, given the unfamiliarity of their home brands in foreign countries (Makino et al., 2002).

Due to their specialisation in the lowest value-added activities in global value chains:

“becoming original design manufacturers (ODMs) and further progressing into original brand manufacturers (OBMs), either through the firm’s own efforts or through brand acquisitions from incumbents, is hence the most difficult phase for any latecomer or newcomer MNE” [Bonaglia et al., (2007), p.8].The best known example of this strategy is the acquisition of the personal computer division of IBM by Lenovo in 2004. In Italy, the acquisition of recognised brands is a common motivation for Chinese FDI. In 2005, the Quianjiang Group, China’s largest scooter manufacturer, acquired Benelli, an established motorcycle producer which, at the time of the acquisition, was in serious financial troubles. Besides the willingness to acquire a historic and world famous brand, the deal aimed at getting access to and leveraging from Benelli’s manufacturing and R&D facilities, and made it Quianjiang’s European R&D centre for the production of high-quality production. Nevertheless, it should be added that in this case the existence of communication problems in the technical area has delayed the development of important new projects to be managed between the Chinese and the Italian facilities. Other deals have occurred in other sectors such as the footwear industry, with the acquisition of Wilson by Wenzhou Hazan, one of the main footwear producers in China, which has maintained design and production in Italy to produce shoes to export to the Chinese market. Another example is the case of Elios, an Italian company producing electrical items such as lamp holders, which was acquired in 2006 by Feidiao and the acquisition in 288 C. Pietrobelli et al.

2007 of Omas, a producer of luxury pens established in 1925 in Bologna, by the Xinyu Hengdeli Group, a trading company linked to LVMH selling luxury goods in the Asian market.

According to some of the key informers interviewed, a further area of competence that Chinese companies, particularly medium-sized firms with little international experience, are seeking abroad is managerial experience. Managers with no international experience run most Chinese companies and they sometimes find it hard to deal with Western management models. In Italy, a case in point is the Hengdian Group (HG), a family-owned business established in 1975 in the Zhejiang region, which has opened its first European subsidiary in Milan. According to its managing director, although HG ranks third among private enterprises in China with a very diversified business in industries such as electronics, pharmaceutical, film and entertainment, it is still a very local firm with little experience of even the Chinese market outside its home region, and no international experience. The reason for opening a European branch is to gradually learn the marketing skills required for exporting, and to identify new potential areas for investment, particularly related to post sales assistance and customer care. Its management lacks international experience, and the Italian managing director, who has a personal, long term, relationship with the son of the founder of HG, is playing a key role in transferring Western management culture to the Chinese managers in the group.





Several key informers noted that the case of HG is very promising in terms of the capability of Italy to attract a new wave of medium-sized Chinese companies that are latecomers in the international market. These companies may be particularly attracted by the small size of Italian companies. Moreover, we expect that in the future these acquisitions willalso be facilitated by the recent changes in the Chinese FDI legislation, aimed at extending the facilitation of the ‘go global’ policy beyond large companies to include SMEs.

4 Conclusions

This paper provides new empirical evidence to understand the motivations of China’s presence in Europe. The evolution of the Chinese pattern of entry in Italy confirms the pattern followed by Chinese firms in other European countries, but we obtain some additional interesting results. Starting from small-scale operations in trade-related activities, Chinese FDI have evolved towards the acquisition of tangible and intangible resources that are deemed necessary to improve China’s presence in international markets and to upgrade their technological and production capacities.

Chinese investments in Italy appear to reflect a ‘Marco Polo’ effect, but in the opposite direction: the Venetian merchant discovered, learnt and brought back the scientific and technological discoveries of the XIII Century China. Today Chinese companies are seeking the original skills and knowledge available in Italian companies and localities, especially in design-intensive, high-quality productions. Thus, they are increasingly targeting the acquisition of technological capabilities and of design skills and brands to tap local competences available in specialised manufacturing clusters in sectors such as automotive and home appliances. The main industries of specialisation of Chinese OFDI in Italy reflect this approach and appear to be related to China’s strategy to Chinese FDI strategy in Italy 289 increase the sophistication of its exports and to move away from standardised commodities and intermediate manufactures and components. Italy is considered a key market for investment because of its size and, especially for its sophisticated demand.

Gaining knowledge about how to satisfy very demanding customers in terms of design, style, branding, marketing and post-sales assistance is what Chinese companies are keen to learn from their activities in Italy. This especially applies to the Italian industrial districts known globally for their production and design excellence, for the density of agglomeration economies and the competitiveness of the supplier networks. These are for instance the cases of the specialised automotive cluster in Turin and the home appliances district in Varese, where Chinese companies have established R&D, design centres and headquarters to absorb foreign technology and improve their technical know-how, especially in design skills, and to benefit from the pool of specialised suppliers to outsource a wide range of activities ranging from engineering to modelling and prototyping. The peculiarities of the Italian model of specialisation, in terms of both sectors and size of firms, appear to be important attractors for Chinese investments, following a novel ‘Marco Polo’ effect to acquire and leverage upon foreign knowledge and capabilities.

There are a number of open questions calling for further research. A key issue is the study of how successful Chinese multinationals are in their strategy: are they creating effective channels for accessing local knowledge? Are they absorbing and transferring it within the company? Furthermore, what are the implications of Chinese FDI on the receiving countries? How do companies acquired by Chinese investors survive? What is the impact on employment? Is there only a loss of key technological capabilities or do Chinese FDI also represents opportunities, due to the injection of fresh capital and the easier access to the rapidly expanding Asian markets?

The expansion of Chinese FDI is definitely a very complex and still understudied phenomenon. There is an urgent need for robust empirical research to better understand it, and to assess whether this internationalisation strategy may show promising avenues for China and for other developing countries, and whether and how the host countries are affected.

Acknowledgements

The paper has greatly benefited from comments by Lin Liu, Martin Chrisney, by two anonymous referees of the IJTLID, and by participants at conferences at the Copenhagen Business School, 2008, Hong Kong Science and Technology University Asialics, 2009, Harvard Kennedy School of Government, 2010, as well as Chatham House and CASCC research seminars in London, September 2008 and January 2009, and in Brussels, June

2009. The authors gratefully acknowledge the collaboration of Thomas Rosenthal of Fondazione Italia China who provided useful contacts with Chinese enterprises in Italy, as well as the support of the MOFCOM branch in Milan, the Bank of China and the Association of Chinese Firms in Italy during the fieldwork. The authors are particularly grateful to the people interviewed for their time and knowledge. Financial support from Compagnia di San Paolo, CASCC (Centro Alti Studi sulla Cina) and PRIN 2007 is gratefully acknowledged.

290 C. Pietrobelli et al.

References Amighini, A. (2008) China and India in the International Fragmentation of the Global Auto Industry: A Comparative Analysis of Recent Developments, Dipartimento di Scienze Economiche e Metodi Quantitativi, Università del Piemonte Orientale, Working Paper No. 10.

Amighini, A. and Chiarlone, S. (2005) ‘Rischi dell’integrazione commerciale cinese per il modello di specializzazione internazionale dell’Italia’, Rivista di Politica Economica, Vol. 95, Nos. 7–8, pp.63–86.

Amighini, A., Rabellotti, R. and Sanfilippo, M. (2010) ‘Outward FDI from developing countries MNEs as a channel for technological catch-up’, Seoul Journal of Economics, Vol. 23, No. 2, pp.239–261.

AT Kearney (2008) Indovina chi viene a cena? Imprese Russe, Indiane e Cinesi in Italia, AT Kearney, Milan.

Bonaglia, F., Goldstein, A. and Mathews, J. (2007) Accelerated Internationalization by Emerging Multinationals: the Case of White Goods Sector, MPRA Paper N, 1485, Munich.

Buckley, P.J., Clegg, J., Cross, A.R., Liu, X., Voss, H. and Zheng, P. (2007) ‘The determinants of Chinese outward foreign direct investment’, Journal of International Business Studies, Vol. 38, pp.499–518.

Buckley, P.J., Cross, A.R., Tan, H., Xin, L. and Voss, H. (2008) ‘Historic and emergent trends in Chinese outward direct investment’, Management International Review, Vol. 48, No. 6, pp.715–748.

China Council for the Promotion of International Trade (2010) Survey on Current Conditions and Intention of Outbound Investment by Chinese Enterprises, China Council for the Promotion of International Trade, Brussels.

Committeri, M. (2004) Investire in Italia? Risultati di una recente indagine empirica, Banca d’Italia, Temi di Discussione N. 491, Rome, March.

Cross, A.R.and Voss, H. (2008) ‘Chinese direct investment in the United Kingdom: an assessment of motivations and competitiveness’, Paper presented at the Conference Corporate Strategies in the New Asia, University of Bremen, Germany, 1–2 February.

Cui, L. and Jiang, F. (2009) ‘FDI Entry mode choice of Chinese firms: a strategic behaviour perspective’, Journal of World Business, Vol. 44, No. 4, pp.434–444.

Daniele, V. and Marani, U. (2008) Criminalità e Investimenti Esteri: un’analisi per le province italiane, MPRA Working Paper N. 6632.

De Propris, L., Driffield, N. and Menghinello, S. (2005) ‘Local industrial systems and the location of FDI in Italy’, International Journal of the Economics of Business, Vol. 12, No. 1, pp.105–121.

Deng, P. (2009) ‘Why do Chinese firms tend to acquire strategic assets in international expansion?’, Journal of World Business, Vol. 44, No. 4, pp.74–84.

Dunning, J.H. (1981) International Production and the Multinational Enterprise, Allen & Unwin, London.

Dunning, J.H. (1993) Multinational Enterprises and the Global Economy, Addison-Wesley, Wokingham.

Duysters, G., Jacob, J., Lemmerns, C. and Jintian, Y. (2009) ‘Internationalization and technological catching-up of emerging multinationals: a comparative case study of China’s Haier group’, Industrial and Corporate Change, Vol. 18, No. 2, pp.325–349.

Filippov, S. and Saebi, T. (2008) Europeanisation Strategy of Chinese Companies: Its Perils and Promises, University of Maastricht, UNU-Merit Working Paper Series N. 2008–055.

Hay, F., Milelli, C. and Shi, Y. (2009) ‘Chinese firms enter Europe: some empirical evidence’, in Wu, Z. (ed.): Financial Sector Reforms and the International Integration of China, Routledge, London, pp.198–214.

Hong, E. and Sun, L. (2006) ‘Dynamics of internationalization and outward investment: Chinese corporations’ strategies’, The China Quarterly, Vol. 187, pp.610–634.



Pages:     | 1 | 2 || 4 |


Similar works:

«1 192 of the Income-tax Act, 1961 Deduction of tax at source Salary Income-tax deduction from salaries during the financial year 2009-10 CIRCULAR NO. 1/2010 [F. NO. 275/192/2009 IT(B)], DATED 11-1-2010 Reference is invited to Circular No. 8/2007, dated 5-12-2007 whereby the rates of deduction of income-tax from the payment of income under the head Salaries under section 192 of the Income-tax Act, 1961, during the financial year 2008-09, were intimated. The present Circular contains the rates of...»

«READING BOROUGH COUNCIL WASTE MINIMISATION STRATEGY 2015 – 2020. “The Council is committed to reduce the growth of waste by promoting waste minimisation through re-use, recycling and composting and to minimise disposal.” 1. Introduction It has never been more important to encourage residents and businesses to minimise the household and commercial waste that they produce. The Council has a duty to provide a framework within which we encourage a reduction in the amount of waste produced,...»

«Transportation and Infrastructure Concentration Advisor: Jose A. Gomez-Ibanez Email: jose_gomez-ibanez@harvard.edu Fall 2016 – Spring 2017 This area of concentration covers any form of infrastructure that is an important shaper of the built environment, particularly transportation, storm water, drinking water and sewage but also energy and telecommunications. Students are encouraged to take courses that examine infrastructure from a variety of perspectives, including: 1. Planning practice and...»

«NBER WORKING PAPER SERIES MODEST POLICY INTERVENTIONS Eric M. Leeper Tao Zha Working Paper 9192 http://www.nber.org/papers/w9192 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 September 2002 We thank Ralph Bryant, Peter Clark, Tom Cooley, Jon Faust, John Geweke, Ross Levine, Adrian Pagan, Peter Pedroni, Tom Sargent, Anders Vredin, Mike Woodford, and especially David Gordon, Chris Sims, and Dan Waggoner for helpful suggestions. The views expressed herein are...»

«FENABA R. ADDO faddo@wisc.edu ssc.wisc.edu\~faddo Department of Consumer Science School of Human Ecology University of Wisconsin-Madison 4204 Nancy Nicholas Hall 1300 Linden Drive Madison, WI 53706 Phone (608) 262-2831 ACADEMIC POSITIONS Assistant Professor, Consumer Science, 2014-Present. University of Wisconsin-Madison Postdoctoral Scholar, Robert Wood Johnson Foundation Health & Society Program, 2012-2014. University of Wisconsin-Madison EDUCATION Ph.D., Cornell University, 2012. Policy...»

«Retail-tainment; the next big thing for retail and shopping centers? by Randy White, CSM CEO of White Hutchinson Leisure & Learning Group Retail-tainment is the concept of adding entertainment and experiences to the retail mix. The trend started a number of years ago but has accelerated during the economic downturn as retailers, shopping centers and malls desperately look for new ways to remake themselves to attract the New Consumer. As we’ve discussed in previous issues, New Consumers are...»

«This is a preliminary draft of the paper that will be presented at the International Conference on Organizational Learning, Knowledge and Capabilities (OLKC), in Amsterdam, The Netherlands, 26-28 April 2009.PLACES, SPACES AND THE DYNAMICS OF CREATIVITY* Patrick Cohendeta, David Grandadama, Laurent Simonb a HEC Montréal, Canada / BETA, Université de Strasbourg, France b HEC Montréal, Canada Abstract Creativity is a major driving force in modern economies, on a global scale, but also on a...»

«Research in International Business and Finance 26 (2012) 120–136 Contents lists available at SciVerse ScienceDirect Research in International Business and Finance j o ur na l h om ep ag e: w w w. e l s e v i e r. c o m / l o c a t e / r i b a f Investability, corporate governance and firm value Thomas O’Connor ∗ Department of Economics, Finance and Accounting, National University of Ireland Maynooth, Maynooth, Co. Kildare, Ireland article info abstract In this paper, I show that...»

«Economic Impact Analysis of the Miscellaneous Metal Parts and Products Surface Coating NESHAP: Final Report EPA-452/R-03-018 August 2003 Economic Impact Analysis of the Miscellaneous Metal Parts and Products Surface Coating NESHAP By: U.S. Environmental Protection Agency Office of Air Quality Planning and Standards Innovative Strategies and Economics Group, C339-01 Research Triangle Park, NC 27711 This report has been reviewed by the Emission Standards Division of the Office of Air Quality...»

«= Working Paper = = U.S. Congressional Committees and SEC Enforcement Against Financial Misconduct Mihir N. Mehta Stephen M. Ross School of Business University of Michigan Wanli Zhao Southern Illinois University Ross School of Business Working Paper Working Paper No. 1288 October 2015 This work cannot be used without the author's permission. This paper can be downloaded without charge from the Social Sciences Research Network Electronic Paper Collection:...»

«INFORMS | Vijay Mehrotra interviews Fred Hillier, November 2, 2015 VIJAY I'm Vijay Mehrotra, professor of business analytics and information systems at the University MEHROTRA: of San Francisco. And I have the pleasure and privilege of having a chance to interview my dissertation advisor, Professor Frederick S. Hillier of Stanford University. Fred, I want to take you back to your days in high school. If I think about that, kind of 1950 to 1954, what was it like in those post World War II days,...»

«The return to elitism in education Danny Dorling A society’s attitudes to innate intelligence are closely correlated with its levels of inequality. A s inequality becomes ever more deeply entrenched into contemporary everyday life, there has been a creeping return to the idea of innate ability. At the same time, priorities in education have become increasingly determined by a utilitarian concern for the needs of the economy, rather than for developing the thinking of each child. One place...»





 
<<  HOME   |    CONTACTS
2016 www.dissertation.xlibx.info - Dissertations, online materials

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.