FOREIGN DIRECT INVESTMENT IN CHINA: BEYOND THE REPRESENTATIVE OFFICE

Diego Quer
University of Alicante, Spain
Enrique Claver
University of Alicante, Spain

ABSTRACT

Nowadays, China is one of the most important destinations for international expansion of firms from all over the world. Based on the traditional theory on foreign direct investment and the resource-based view of the firm, this paper analyzes the influence of various tangible and intangible firm-specific factors on the choice amongst three different modes of entry into China: representative office, joint venture and wholly-owned subsidiary. The results obtained suggest that the size of the investing firm, its performance as well as its experience regarding the country have a positive influence on the choice of types of foreign direct investment that involve a high level of resources commitment. In addition, the specific aim of the project affects these relationships.

Keywords: FDI mode choice; China; firm-specific factors.