Chinese FDI to Germany in the Renewable Energy Sector: Pre- and Post-Entry Psychic Distance Perceptions on Regulations-Related Dimensions

Katiuscia Vaccarini, Christoph Lattemann, Francesca Spigarelli, and Ernesto Tavoletti
Publication Date: 
January 1st, 2017

Countries differ on various dimensions such as culture, language, business practices, policymaking, and regulation. Research shows that the amount of "distance" between countries on these dimensions impacts foreign direct investments (FDI) flows. Specifically, the greater the distance the greater the difficulties for investors. In this paper, the authors analyze the perception of "psychic distance" (PD) between China and Germany, by surveying Chinese managers who invested in Germany in the renewable energy (RE) sector. The authors employ a five-company multiple case study and analyze what PD managers perceive and if Chinese managers have correct perceptions or misperceptions. Further, the authors investigate if their perceptions change over time. They find regulation-related dimensions (political system, legal system, and regulations) are most important for Chinese FDI to Germany in the RE sector. They also show that Chinese managers misperceive the relevance and impact of PD differences and that the problem is worse when managers are inexperienced.

This piece was originally published in Energy Policy, Vol. 101 (2017). A pre-publication proof is posted with the gracious permission of the authors. Copyright remains with the original copyright holders.

**Posting of this report does not represent an endorsement by the Mr. & Mrs. S.H. Wong Center for the Study of Multinational Corporations and has been done to facilitate research and promote debate about multinational corporations/FDI in and from East Asia.