Subnational Institutions and Outward FDI by Chinese Firms

Victor Zitian Chen, Jing Li, and Daniel M. Shapiro
Publication Date: 
December 1st, 2015

This study extends the classic country-specific advantage (CSA) – firm-specific advantage (FSA) framework by integrating an institution-based view of CSAs into the discussion of FSAs. In his classic CSA – FSA framework, Alan Rugman suggests that successful multi-national enterprises (MNEs) are often built on the interaction between strong FSAs and strong CSAs at home. In the case of emerging market multi-nationals (EMNEs), he argued that strong CSAs were of particular importance in allowing EMNEs to develop FSAs. In particular, the authors examine CSAs at the sub-national level. Using a unique data set on overseas investment by Chinese firms and causal mediation analysis, the authors find strong evidence in support of the view that strong sub-national institutions help emerging market firms develop the capabilities to enter developed country markets.

This piece is viewable at and was originally published in The Multinational Business Review, Vol. 23, No. 4 (2015). Copyright remains with the authors and MBR as originally assigned.

**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.