Country‐of‐Origin and Social Resistance in Host Countries: The Case of a Chinese Firm

• Author: Yang Yu,Yulong Liu
• Date: 01 May 2018
• DOI: http://doi.org/10.1002/tie.21873
• Published date: 01 May 2018

347

Correspondence to: Yang Yu, School of Marketing and International Business, Victoria University of Wellington, New Zealand, PO Box 600, Wellington 6140,

NewZealand, +64 4 463 6486 (phone), +64 4 463 5231 (fax), yang.yu@vuw.ac.nz

Published online in Wiley Online Library (wileyonlinelibrary.com)

© 2016 Wiley Periodicals, Inc. • DOI: 10.1002/tie.21873

Country-of-Origin and

Social Resistance in

Host Countries: The

Case of a Chinese Firm

By

Yang Yu

Yulong Liu

While China ’ s outward direct investments continue to soar, many Chinese  rms reportedly face

social resistance in host countries during the internationalization process. We explore this phenom-

enon from a country-of-origin ( COO ) perspective using Fiske and colleagues’ (Fiske, Cuddy, Glick,

& Xu, 2002 ; Fiske, Xu, Cuddy, & Glick, 1999 ) stereotype content model. Our  ndings from a recent

case in New Zealand show that China ’ s COO emerges as a key variable in uencing how local

actors view Chinese investors. Speci cally, despite China ’ s signi cant economic and social develop-

ments over the past decades, it suffers from a somewhat negative country image in two stereotype

dimensions: competence and warmth. This leads to a perception by local actors that Chinese  rms

are of low quality, which explains the source of resistance in society. To address such a liability of

origin, Chinese  rms must learn to deal with this form of stereotypical judgment encountered in

a host environment. Further contributions and limitations of the study are discussed in the article.

©2016Wiley Periodicals, Inc.

RESEARCH ARTICLE

348

RESEARCH ARTICLE

Thunderbird International Business Review Vol. 60, No. 3 May/June 2018 DOI: 10.1002/tie

Several major acquisitions by Chinese multinationals

in developed countries were discontinued in the face

of strong opposition from host-country public, in some

cases after having been approved by the authorities.

OECD Investment Newsletter (June 2009)

Chinese companies today have strong ambitions to

invest overseas, but they are extremely inexperienced

about how to make themselves accepted.

The Wall Street Journal (January 21, 2013)

Introduction

T he global economy witnesses a rapid growth of

outward direct investments (ODI) from emerg-

ing markets. China contributes significantly to

this phenomenon. In 2014, for example, after a 10% rise

from the previous year, China ’ s ODI reached around

US$120 billion, exceeding its inward foreign direct

investment (FDI) for the first time (United Nations Con-

ference on Trade and Development [UNCTAD], 2015 ).

Despite this remarkable transformation, Chinese firms

are faced by social resistance in a number of host coun-

tries, including both developed and developing nations

in Europe, Africa, and South America. Such resistance

can disrupt firms’ internationalization, and it has been

reported widely in the media, featuring in the Wall Street

Journal and in practitioner-oriented articles (e.g., Du,

2014 ; He & Lyles, 2008 ). However, the issue has received

inadequate attention in mainstream literature. This is

because scholars interested in the “globalization of Chi-

nese enterprises” (Lattemann, Alon, Chang, Fetscherin,

& McIntyre, 2012 ) have focused primarily on the anteced-

ents, motives, entry strategies, and investment patterns of

China ’ s internationalized firms (e.g., Buckley et al., 2007 ;

Buckley, Tan, & Xin, 2008 ; Cui & Jiang, 2009 ; Deng, 2007 ;

Kang & Jiang, 2012 ; Kolstad & Wiig, 2012 ; Wei, 2010 ).

This study aims to reduce the void. From a social

judgment perspective, actors’ tendency to accept or resist

a firm depends on how they evaluate that firm and form

an opinion about the firm ’ s acceptability (Bitektine,

2011 ). Scholars have noted the role played by country-

of-origin (COO) when making social judgments of firms

in an international business context. Kostova and Zaheer

( 1999 ) mentioned the great challenge firms would expe-

rience in gaining acceptance in foreign markets due to

the stereotyping of the host environment. Ramachandran

and Pant ( 2010 ) pointed out that, for emerging market

multinationals, COO can be a source of disadvantage and

social bias in a host country. Nonetheless, despite these

notions, we have seen very little investigation of any plau-

sible link between COO and firm-level social acceptance

or resistance. This is because COO research has tradi-

tionally focused on consumers’ evaluations and on their

purchasing behavior of foreign products.

To also contribute to this line of research, we are

interested in how COO induces local resistance to Chi-

nese firms in a host country society. A COO can be asso-

ciated with positive and negative biases simultaneously

(Moeller, Harvey, Griffith, & Richey, 2013 ) and COO

effects are not always equivalent across groups (Dimofte,

Johansson, & Bagozzi, 2010 ). For example, the China

COO may be favorable to some yet unfavorable to others.

In this regard, we choose to focus on resistance, which

pertains to the negative COO effect in social judgment

for three reasons. First, it is resistance in society that

causes directly severe consequences for firms such as per-

formance decline and withdrawal from market (Calvano,

2008 ); second, research has shown that negative COO

effect actually has a much larger impact on the overall

acceptance of a foreign object (Maheswaran, 1994 ). For

example, while resistance may stem from a small group of

actors, it often grows fast to shape the social judgment of

the focal object greatly. These two suggest that it is crucial

for Chinese firms as well as researchers to understand

how resistance emerges and manifests itself in a local

environment. Third, we consider that resistance toward

Chinese firms could potentially have a long-term impact

on the host country ’ s national economy, given that FDIs

inject host countries with valuable financial capital, and

China, as already mentioned, is becoming a major source

of such investments.

Consistent with prior scholars, we view COO as an

image or stereotype associated with firms’ home country

(Maheswaran, 1994 ; Samiee, 1994 ). On this basis, we

draw on Fiske et al.’s ( 1999 , 2002 ) stereotype content

model to guide our investigation and theoretical devel-

opment. The model originated in social psychology and

has recently begun to attract interest from organization

scholars (Chattalas, Kramer, & Takada, 2008 ; Chattalas &

Takada, 2013 ; Xu, Leung, & Yan, 2013 ). Because of the

exploratory nature of our research inquiry, we adopt a

qualitative approach, focusing on a case in New Zealand

that involved a Chinese company purchasing local dairy

farmland. We chose the case because it received a lot of

publicity, providing an ideal context to study social judg-

ment (Patriotta, Gond, & Schultz, 2011 ). Meanwhile, New

Zealand is ranked by the World Bank Group as one of

the freest countries in which to do business ( www.doing-

business.org ); it was also the first Organization for Eco-

nomic Cooperation and Development (OECD) nations