Investigating Chinese Outward Foreign Direct Investments: How Can Firm‐level Data Help?

• Author: Marco Sanfilippo,Alessia Amighini,Claudio Cozza,Roberta Rabellotti
• DOI: http://doi.org/10.1111/cwe.12091
• Published date: 01 November 2014
• Date: 01 November 2014

44 China & World Economy / 44–63, Vol. 22, No. 6, 2014

©2014 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Investigating Chinese Outward Foreign Direct

Investments: How Can Firm-level Data Help?

Alessia Amighini, Claudio Cozza, Roberta Rabellotti, Marco Sanfilippo*

Abstract

The empirical literature on China’s outward foreign direct investment mainly relies on

aggregate data from official statistics, but the reliability of such data is currently a matter of

concern because it does not take account of relevant features such as industry breakdown,

ownership structure and entry mode. A novel firm-level database, EMENDATA, compiled

by matching data from several available sources on various types of cross-border deals

and including information on group structure, provides a more accurate picture and enables

new empirical analyses of the rapidly increasing presence of Chinese companies abroad.

Based on this database, this paper offers a more precise assessment of the geographical and

sector specialization patterns of Chinese outward foreign direct investment into Europe and

suggests new avenues for future research.

Key words: China, firm-level data, foreign direct investment, multinational enterprise

JEL codes: F21, F23

I. Introduction

The literature on the outward expansion of Chinese firms has grown rapidly over the past

decade, with mixed and often contradictory results. Most of the existing studies are based

on aggregate official foreign direct investment (FDI) data from the Chinese Ministry of

Commerce (MOFCOM) (among others, see Buckely et al., 2007; Kolstad and Wiig, 2012) or

*Alessia Amighini, Assistant Professor, University of Eastern Piedmont, Novara, Italy. Email: alessia.

amighini@eco.unipmn.it; Claudio Cozza, Research Fellow, University of Trieste, Trieste, Italy. Email:

claudio.cozza@deams.units.it; Roberta Rabellotti, Professor, University of Pavia, Pavia, Italy. Email:

roberta.rabellotti@unipv.it; Marco Sanfilippo, Assistant Professor, University of Antwerp, Antwerp,

Belgium. E-mail: marco.sanfilippo@uantwerp.be . The authors would like to thank the anonymous referees

for their useful suggestions. This paper is an output of the project “The challenge of globalization:

Technology driven foreign direct investment (TFDI) and its implications for the negotiation of

International (bilateral and multilateral) Investment Agreements ” funded by the Riksbank Foundation.

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Investigating Chinese Outward Foreign Direct Investments

©2014 Institute of World Economics and Politics, Chinese Academy of Social Sciences

on case studies on individual firms (Zhang and Filippov, 2009; Zhang et al., 2010). Despite

recent improvements, a number of concerns remain about the reliability of FDI data from

MOFCOM and their comparability with international data sources. Moreover, official FDI

data do not allow disaggregated and detailed investigation of the internationalization

strategies of Chinese multinational companies in terms of their preferred mode of entry,

their main sectors and target countries. On the contrary, internationalization strategies are

the focus of a number of case studies, many of them on already well-known companies,

providing very useful anecdotal evidence but limited scope for generalization (e.g. Fan

et al., 2012).

Addressing these limitations, some recent empirical studies focus either on greenfield

FDI (De Beule and van de Bulcke, 2012; Amighini and Franco, 2013; Amighini et al., 2013a,b)

or on mergers and acquisitions (M&A) (Bhabra and Huang, 2013). In the present paper, we

overcome these limitations by relying on a novel proprietary database, the Emerging

Multinationals’ Events and Networks DATAbase (EMENDATA), which includes greenfield

investments, M&A and other minority investments. The data are based on company

information gathered from various sources: the Financial Times Group ’s fDi Markets, Bureau

van Dijk’s (BvD) Zephyr and Thomson Reuter’s SDC Platinum. In EMENDATA, each

cross-border deal is associated with information available in BvD’s Orbis on the investing

company and the group to which the firm belongs based on its global ultimate owner

(GUO). This allows the examination of the foreign expansion strategies of Chinese

multinationals and their groups over time through multi-level analyses: (i) at deal level to

investigate the distribution across sectors, business activity, and countries distinguished

by deal type; (ii) at company level and, more especially, group level, to map foreign expansion

and corporate strategies; and (iii) at country and regional levels to examine the location

choices broken down by sector and deal type.

The contribution of the present paper to the literature on Chinese outward FDI (OFDI)

is twofold. On the one hand, we argue that the mixed findings on Chinese MNEs ’

internationalization strategies in the current literature are largely influenced by the underlying

data sources, while many results appear less contradictory when relying on more detailed

and accurate data. On the other hand, we introduce a new database with the aim of opening

up a research agenda to expand our knowledge of such a rapidly increasing phenomenon.

The rest of the paper is organized as follows. Section II discusses some shortcomings

of FDI official statistics and reviews the empirical literature on the outward expansion of

Chinese firms, focusing on the different data sources and the implications of their use on

empirical findings. Section III describes EMENDATA and provides an overview of its

contents. Section IV suggests some avenues for future empirical analyses at the group

level enabled by EMENDATA. Section V concludes.