What is strategic-asset-seeking and does it help explain why Chinese Essay

What is strategic-asset-seeking and does it help explain why Chinese business groups internationalise their operations - Essay Example In addition to increasing foreign direct investment (FDI) inflows, China’s outward FDI investments have been increasing at a phenomenal rate and drawing the attention of scholars and researchers (Fung & Garcia-Herrero). In attempting to understand and predict location choices of FDI outflows, researchers use a number of hypotheses including asset-seeking explanations (Makino, Lau, & Yeh). In this research study, trends in China’s FDI outflows are examined and analysed with a view to determining whether or not strategic asset-seeking provides a satisfactory explanation for China’s FDI outflows. This paper is therefore divided into three main parts. The first part of this paper defines asset seeking. The second part of this paper explores and discusses trends in China’s FDI outflows. Some examples of Chinese firms’ internationalisation will be highlighted in the second part of this paper. The final part of this paper analyses whether or not strategic asset-seeking provides a satisfactory explanation of China’s FDI outflows or internationalising trends. In order to test the hypothesis that strategic asset seeking explains China’s trends toward internationalization, references will be made to examples of Chinese companies that have become internationalized. ... 72). One of the ways in which strategic asset seeking organizations attempt to invest abroad as a means of gaining or maintaining a competitive edge is to invest in research and development or in â€Å"design facilities† (Buckley, et. al., p. 114). As Buckley, et. al. explain, these kinds of investments are intended to put the organization in a position to access current know-how and to be able to take part in the production of new products and to set standards for maximizing the organization’s competitive edge. According to Buckley, et. al.: The investor normally intends to benefit from spillover effects deriving from agglomerations of similar minded companies and from complementary industries in the host country (p. 114). In addition, strategic asset-seeking behaviour of organizations usually takes place when there are improvements in popular brands, the national supply chain and in management and expertise talent via directly purchasing or from â€Å"proximity of op erations† (Buckley, et. al., p. 144). In the latter scenario, the organization gains from operational proximity via the spillover effects and/or â€Å"demonstration effects† (Buckley, et. al., p. 114). According to Dunning’s eclectic paradigm suggest that firms will usually invest abroad to gain an advantage that is not usually available at home. These advantages can include the acquisition of knowledge, expertise, and distribution channels (Dunning). According to Dunning and Lundan, strategic asset seeking is not about exploiting conditions abroad, although it may be an important and complimentary motive. However, the impetus for asset-seeking behaviour is the acquisition of an organization’s â€Å"global portfolio of physical assets and human