Economic globalization has become one of the most fundamental characteristics associated with the evolving world economy, in which multinational corporations (MNCs) are viewed as an important driving force of global economic integration by their overseas investment and strategic adjustment. In China, with the deepening of its âGoing Outâ and âBelt and Roadâ national strategies,1 an increasing number of Chinese MNCs have been stepping onto the world stage and participating in global competition.
Since it joined to the World Trade Organization (WTO) in 2001, China and Chinese corporations have been gradually participating in multinational business operations and global competition, which has accelerated the progress of internationalization of Chinese corporations and the development and implementation of the national strategies mentioned above. According to the Statistical Bulletin of Chinaâs Foreign Direct Investment by the Ministry of Commerce, Chinaâs total outward direct foreign investment in 2003 was only 2.9 billion US dollars, which has since risen sharply to 143.04 billion US dollars in 2018, a 48-fold increase over 15Â years. Chinese corporations have therefore made tremendous progress in the magnitude of transnational investment.
However, compared with MNCs in developed countries, which have been running their business for a long period of time, Chinese MNCs are relatively newer players in operating international businesses and participating in global competition. Due to the complexity of the stakeholder relationships involved among home countries and host countries, Chinese MNCs have faced many unprecedented challenges in multinational business operation and governance. The institutional differences caused by the regulatory systems in different countries further expose Chinese MNCs to a variety of institutional constraints, which exacerbates the uncertainty of operating their international business and conducting multinational governance.
Over the last few decades, many leading Chinese companies have gradually developed international business operations, using a âlearning by doingâ approach based on their understanding of transnational governance. Given the importance that firmsâ governance structure can have on their implementation of corporate strategic decisions, including outward foreign direct investment, the entry mode and location of overseas ventures, corporate governance has been viewed as a system of interrelated general and institutional elements of multinational corporations. Thus, most of the existing Chinese MNCs have a urgent need to know about what efficient and effective governance structures and mechanisms of multinational corporations should be, and how to improve their current governance structures to facilitate multinational business operations and enhance the quality of multinational governance, thereby gaining certain types of competitive advantages in the long run.
In this regard, it is important and worthwhile to sort out and explore current typical problems faced by Chinese MNCs in their international business operations and transnational governance, and to analyze whether and how corporate governance as an important institutional element of MNCs affects different stages of their internationalization process. Such exploration and analysis can improve their ability to conduct transnational governance, thereby facilitating the implementation of the âGoing Outâ national strategy. However, based on research conducted to date, little is known about these important issues related to Chinese MNCs.
Thus, the aims and objectives of this book are to identify various difficulties encountered by Chinese MNCs when they employ âgoing outâ strategies, such as misunderstanding of institutional differences between home countries and host countries and inefficient or inappropriate entry mode and location of overseas investments. Moreover, this foundational knowledge is used to investigate the effect of their corporate governance practices and adjustments that take the form of corresponding countermeasures in international business operations and transnational governance, which is all considered in the context of globalization.
Specifically, this book provides a review of eight typical cases and examples selected from current practices of Chinese MNCs across various industries by using a case study approach. The book identifies and analyzes the deficiencies and challenges faced by a number of Chinese MNCs associated with their involvement in the internationalization process, and it also explores how Chinese MNCs deal with issues, such as ownership control, board of directors, governance mechanisms, and performance incentives in transnational governance. The book also describes the characteristics, experiences, and lessons of these Chinese MNCs when they operate internationally and conduct transnational governance, thereby providing valuable practical insights and implications to facilitate both the development of Chinese MNCs and the implementation of âGoing Outâ strategies. For example, by analyzing eight Chinese case studies, the book is the first to identify and suggest three important governance mechanisms implemented by Chinese MNCs, namely stakeholder governance, board of directorâs governance and executive governance. The book also suggests a typical evolutionary process of corporate internationalization, which includes the following four stages: (1) the basic stage; (2) the transition stage; (3) the conflict stage; and (4) the formation stage. These important revelations and suggestions detailed in this book provide new insights and guidelines for how to improve practices and the implementation of business operations by existing and potential multinational corporations.
This book consists of eight case study chapters. The second chapter analyzes the multinational governance of Alibaba Group, an E-commerce giant, and its strategies of overseas investment and governance. This case study not only explores the evolution of Alibaba Groupâs parent companyâs equity, board structure, corporate control rights, but it also sorts out and summarizes the strategies and challenges of Alibabaâs transnational governance and overseas entry mode.
The third chapter analyzes the transnational governance of Geely Groupâs acquisition of Volvo. From the perspectives of Geely Groupâs stakeholder governance, executive management, board governance, and parentâsubsidiary relationship governance, this case study explores how Geely can achieve the successful acquisition and integration of Volvo by strengthening transnational governance.
The fourth chapter analyzes Jinjiang Groupâs acquisition of the American Intercontinental Hotel. By analyzing Jinjiang Groupâs cross-border merger and acquisition (M&A) process, it systematically explores the characteristics of cross-border governance before and after corporate mergers and acquisitions, while also highlighting the successful M&A experience.
Chapter 5 analyzes the construction and evolution of Lenovo groupâs transnational governance framework. Based on the process of Lenovo groupâs transnational operations, this case study divides the transnational governance framework into the four stages mentioned previously. It also discusses the formation mechanism and theoretical model of transnational governance of the corporation in emerging markets.
Chapter 6 explores the equity governance model based on WISCOâs overseas investment projects. By analyzing seven cases of Wuhan Iron and Steelâs investment projects in five countries, the mechanism for setting up equity governance models when enterprises enter overseas markets are discussed along with the âWISCO model,â which is based on identifying the relationship between equity structure and national institutions.
Chapter 7 analyzes the governance issues of the PingAn Groupâs acquisition of Fortis Belgium. By systematically reviewing the entire process of this overseas acquisition by the PingAn Group the main reasons for the failure of such acquisitions and the problems and challenges faced by PingAn Groupâs transnational governance are explained.
Chapter 8 delves into the cross-border governance of Zoomlionâs acquisition of Italian CIFA. This case mainly explores the stakeholder governance during Zoomlionâs acquisition of CIFA and the multinational governance mechanism after the acquisition. From the perspective of the relationship governance between Zoomlion and CIFA and the governance structure adjustment, it provides practical implications for the implementation of corporate mergers and acquisitions synergy.
Chapter 9 is a case study of Sanyâs transnational acquisition of Putzmeister. It explores various multinational governance mechanisms such as stakeholder governance, subsidiary governance, parent company governance, and parentâsubsidiary relationship governance in the Sanyâs acquisition process. It finally provides experience and lessons for improving and enhancing the companyâs transnational governance capabilities.
Footnotes
1
The âGoing Outâ strategy (also referred to as the Going Global Strategy) was an effort initiated in 1999 by the Chinese government to promote Chinese investments abroad. The Government, together with the China Council for the Promotion of International Trade (CCPIT), has introduced several schemes to assist domestic companies in developing a global strategy to exploit opportunities in the expanding local and international markets.
The Belt and Road Initiative is a global development strategy adopted by the Chinese government in 2013, which involves infrastructure development and investments in nearly 70 countries and international organizations in Asia, Europe, and Africa.
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