Chinese MNEs In The European Union

The Huddersfield Business School heard Dr Nan Zheng from the School’s Strategy and International Business Research Group present her research on “Subsidiary Performance of Chinese MNEs in the European Union: An Institutional Perspective”.

As Nan says “Grounded in an institution-based view, this presentation was built around the argument that both formal and informal institutions are central to the understanding of subsidiary performance of Chinese MNEs in the European Union (EU). My colleagues and I have tested the hypotheses on 225 Chinese subsidiaries in 17 EU countries, controlling for firm-, industry- and country-level factors. The results lend support to the hypotheses of the negative impact of formal institutional distance and the positive impact of informal institutional distance on the subsidiary performance of Chinese MNEs in the EU. In China, due to a formal institutional void, Chinese firms are forced to substitute formal institutions with informal institutions for their business activities. Inward internationalization at home has enabled Chinese MNEs to be familiar with host country informal institutions. Therefore, informal institutional distance is not a barrier, but an opportunity for pulling different routines and repertoires together, which in turn gives subsidiaries a competitive advantage and has a positive effect on subsidiary performance. However, inward internationalization cannot bring a host country’s formal institutions to China; therefore, formal institutional distance is a challenge that Chinese MNEs have to overcome, and has a negative impact on subsidiary performance.”

Professor John Anchor, says “The research of Nan and her colleagues addresses an important gap in the literature. It is also extremely topical. I look forward to reading more about it in due course”.