Chinese Entry Mode Choice in African Countries
MSc Business Administration – International Management Track University of Amsterdam
Student: Jing Li Student ID: 11950161 Supervisor: Dr. Niccolò Pisani Date of Submission: June 22nd, 2018
Master’s Thesis – Final Version
AN EXCELLENT STUDY
The Faculty of Economics and business Amsterdam, Netherlands, 1083CN
Tel: 31-626974306
Statement of Originality
This document is written by student Jing Li who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Abstract
Taking into the consideration of the situation of current international market, the
importance of Chinese enterprises, and the difference of African market, this study was made.
The previous researches have little investigated the decision-making of Chinese enterprises
about entry mode choice in African area. In view of this, the purpose of this study is to analyze
the impact of Chinese enterprises’ factors, namely firm size and firm experience, on the level
of equity commitment in the African continent. Moreover, this study examines the moderating
effects of financial slack on the underlying relationship between firm size with firm experience
and the level of equity commitment. Using the data from Orbis and corresponding annual report
of Chinese enterprises from Global Fortune 500 in the year of 2016, the empirical results
support the hypothesized positive impact of firm size on level of equity commitment. However,
the findings do not provide evidence for firm experience and the moderating effects of financial
slack. Therefore, this study contributes to the academic literature by supporting the impact of
firm size on level of equity commitment when doing internationalization. Moreover, this work
provides implications for managerial decisions as well as limitations and suggestions for future
researches.
Keywords: Chinese enterprises; African market; Global Fortune 500; frim size; firm
List of Contents
List of Figures ... 5
List of Tables ... 5
1.Introduction ... 6
2.Literature review ... 8
2.1.Factors in African countries ... 8
2.1.1. Economy in Africa ... 9
2.1.2. Resource in Africa ... 10
2.1.3. IB research about African countries ... 11
2.2.Chinese enterprises ... 12
2.2.1. The internationalization of Chinese enterprises ... 14
2.2.2. Relationship between Chinese enterprises and African countries ... 14
2.3.Entry mode ... 17 2.4.Research gap ... 20 3.Theoretical framework ... 21 3.1.Firm size... 21 3.2.Firm experience ... 22 3.3.Financial slack ... 24 4.Methods ... 26
4.1.Sample and data collection ... 26
4.2.Variables and measures... 26
4.2.1. Dependent Variable ... 26
4.2.2. Independent Variable ... 27
4.2.3. Moderating variable ... 27
4.2.4. Control Variables ... 28
5.Analysis & results ... 29
6.Discussion... 34
6.1.Practical relevance ... 34
6.2.Limitations & Future Research ... 35
7.Conclusion ... 36
Acknowledgement ... 38
List of Figures
Figure 1. China’s FDI inflow and outflow (1990-2014)... 13
Figure 2: Conceptual model ... 26
List of Tables
Table 1. Composition of Trade ... 15Table 2. China’s overseas direct investment in Africa, 2004-2008 ... 16
Table 3. Operationalization of Variables ... 29
Table 4. Mean, standard deviation and Correlations of study variables ... 30
1. Introduction
Africa is the second largest and most-populated mainland in the world, with 1.2 billion
people, which accounts for approximately 16% of the world’s human population. There are 54
countries in the African continent. Nevertheless, the culture, language, policies and ethnicities
are diverse amongst those countries because of the wide region. The data of the past decade
reveals that the African areas are now experiencing fast growth because of abundant resources
and investment from foreign enterprises. Thanks to the globalization and the economic
integration, a large number of enterprises are eager to expand their business in Africa. Most of
the previous researches are focused on the foreign direct investment (FDI) in African countries
(Asiedu, 2002; Anyanwu & Yameogo, 2015); or the relationship between FDI with the export
of African countries (Mijiyawa, 2016), the welfare in Africa (Soumarr, 2013), or the
infrastructural development and natural resource in Africa (Anarfo, Agoba & Abebreseh, 2017);
or the factors influenced the FDI in Africa (Asiedu, 2005). Few researches investigate other
types of entry mode in African countries.
As compared to the former decades, a significant amount of the Chinese private and
stated owned enterprises are setting off to Africa for their business via different channels.
Moreover, China is now the third largest business partner of Africa, these companies offer
plenty of job opportunities for the locals. Furthermore, the internationalization of Chinese
enterprise was dual strategic intents with seeking the exploitation of firm-specific advantages (Liu et al., 2008). Liu et al. (2008) found that the choice of entry modes of these enterprises with the aim of successively grater control. Pan and Tse (2000) conclude two different entry
modes, equity and non-equity mode, which is according to the different level of requirements
about control and investment from subsidiaries. Nevertheless, there are few researches
Amongst the developing countries, the economy in most of African countries is at a lower
level. Because of the resource-endowment in the African countries, an ever-increasing amount
of the Chinese enterprises is willing to enter this region. However, few write about the Chinese enterprises’ entry mode choice of entering into the African countries (Lin & Farrell, 2013) and
the factors which may influence their decision-making. Generally, factors in firm-level such as
firm size (Ge & Wang, 2012) and firm experience (Bruneel, Yli-Renko & Clarysse, 2010) are
vital to the decision making in the internationalization of an enterprise, so far researches have
not focused on the relationship between the factors and the entry mode of Chinese enterprises
in African countries. Therefore, the purpose of this study is to bridge the gap and to investigate
the impact of these two factors on the entry model choice of Chinese enterprises in African
countries. The classifications about entry mode are various, due to the implication about
requirements of control and investment, the level of equity commitment is selected to represent
different entry modes. Furthermore, compared to the number of 3 Chinese enterprises on the
first publication of Global Fortune 500 in 1995, there were 115 Chinese enterprises on the
Fortune Global 500 at the end of 2017 (109 from mainland China and Hong Kong, 6 from
Taiwan). Therefore, my focus is on the Chinese enterprises in the Fortune global 500.
Accordingly, the research question in this paper is: How the key factors influence the entry
mode choice of the Chinese enterprises in African market? In addition, moderating effects of
financial slack is included. While previous research has emphasized the significant role of
financial slack in successful practice (Joo & Kim, 2004), so far researchers have not focused
on the relationship between financial slack and the equity commitment of Chinese enterprises.
The hypotheses of this study were tested on a large sample of Chinese enterprises, received
from the Orbis and corresponding annual report of the year 2016. The findings of this study
support the hypothesized positive impact of firm size on the level of equity commitment.
of financial slack. Besides the results, this paper will serve several purposes and will have a
look at the Chinese enterprises in Fortune Global 500 and how they can use the findings from
this paper to design the strategy which will assure them of easy and adaptable entry into the
African countries. They could possibly utilize the information from this paper to resolve some
problems which they may come across on their way of entering the African market.
The rest of this study is structured as follows. The following section reviews the relevant
literature regarding African countries in three aspects (economy, resource and IB research),
current situation of Chinese enterprises especially about the relationship with African countries
and entry mode. In section 2, different hypotheses are identified as well as the developed
conceptual model. The forth part discusses the data source and the variables used in empirical
analysis, with talking about the methodology and the statistical findings of this study.
Thereafter, next section discusses the results, the limitations of this study and provides
implications for future researches. In the final part, the conclusion is presented.
2. Literature review
2.1. Factors in African countries
With over 30 million square kilometres’ area, Africa is the second largest mainland on
the earth (Oluwatayo & Ojo, 2018), referring to the size of China, India, America and the
combining of most European countries (“The true true size of Africa”, 2010). Africa is the most
populous continent with over 1.287 billion people but the majority is young generation (World
Population Review, 2017). Furthermore, it’s enriched with both natural and artificial resources
(AFDB, OECD & UNDP, 2015). Nowadays, with the specific end goal of their own
development, the global economies are going to Africa (George, Corbishley, Khayesi, Haas &
Tihanyi, 2016). Specifically, during 1990-2000, the average annual growth of the real output
The growth rate of Africa has increased by 5% on average for amid the past 15 years (The
Africa Competitiveness Report 2015, 2015). Moreover, 26 of the 54 countries in Africa have
already reached middle-income status, the percentage of those who live in extreme poverty has
reduced from 52% in 2005 to 42% in 2014 (African Development Bank, 2014). Africa begins
to capture the imagination, entrepreneurs, corporate executives, and scholars as an emerging
market of new growth opportunities all included (George et al., 2016). Furthermore, according
to the estimation of the Mckinsey Global Institute, almost 50% of the African people will have
the internet access to connect themselves for various services of health care, education, finance,
retail, and government (Lions on the move: The progress and potential of African economies,
2010).
2.1.1. Economy in Africa
Economic growth refers to the amount of production of goods or services by the economy
as compared to the past (Lecturer, 2016).The sustained economic growth is regarded as the
economic development (Oluwatayo & Ojo, 2018). Nevertheless, amid these years, the
economy in Africa has changed dramatically. In the past 15 years, the growth rate of Africa
has increased by 5% on average (The Africa Competitiveness Report 2015, 2015). Actually,
the African economic growth is a mix of good and bad (Oluwatayo & Ojo, 2018), which is
attributable to the different economic outcomes across the African countries (AFDB et al.,
2015). For example, the economic growth in countries like Ghana, Mozambique, Namibia and South Africa is materializing but Somalia, Liberia, and Eritrea haven’t experienced economic
revolution yet (Oluwatayo & Ojo, 2018).
Since the mid-1990s, Africa's development fortunes began a positive inversion (Mullings
& Mahabir, 2018). The casual economy in the African nations is developing in numerous
essential industries, for example, in exchange, farming, assembling and land, transport and
administration segment is the most fundamental driver of Africa's development, which takes
up around 47% GDP commitment in the vicinity of 2000 and 2011 as against 37% for industry
and 16% for horticulture (UNCTAD, 2014).
The African business condition isn't as great as different landmasses in spite of the
maintained financial development (Oluwatayo & Ojo, 2018). The greatest challenge is
unemployment for the young people particularly. Amid these years, the development of youth
is speedier as compared to the accessible opportunities for work (Oluwatayo & Ojo, 2018). In
the meantime, the unemployment of the larger part of adolescents in Africa thus trades off the
security status of the landmass (Oluwatayo & Ojo, 2018). The African district has the most
noteworthy birth rate everywhere throughout the world. For example, the estimation about the
population in Nigeria and Uganda uncovers that half of them are younger than 15 (Oluwatayo
& Ojo, 2018). Besides, the quantity of individuals in sub-Saharan Africa is evaluated to be
twofold before the finish of 2025 and even fourfold before the finish of 2100 (Sippel et al.,
2011).
2.1.2. Resource in Africa
In the past decades, natural resources have been regarded as vital to the economic
development of many resource-endowed countries by the assessment of international financial
institutions (Eregha & Mesagan, 2016), besides, the natural resource endowment offers plenty
of opportunities to achieve high levels of growth and development (Ndikumana & Abderrahim,
2010). Africa is known as its abundant natural resources (Ndikumana & Abderrahim, 2010).
In the continent, it contains 30% of the minerals in the world as well as the largest reserves of
precious materials, which include more than 40% of global reserves of gold, 60% of cobalt and 90% of platinum (KPMG, 2013). Moreover, the African continent is also the world’s reserves
Africa is abundant of water resources, however, majority of the people in this continent
have no access to potable water (Oluwatayo & Ojo, 2018). The water scarcity influences the
lives of more than 300 million Africans, of whom about 75% use the groundwater as their
primary source of drinking water, and this represents only 15% of the renewable water resource
in this continent (George, Corbishley, Khayesi, Haas & Tihanyi, 2016). This is because most
of African countries are absence of water storage and irrigation technology (Oluwatayo & Ojo,
2018).
As one of the driest continent in the world, 90% of soils in this continent are improper
for agriculture and even only 0.25% of them have low moderate potential for sustainable
farming (George, Corbishley, Khayesi, Haas & Tihanyi, 2016). Furthermore, under the impact
of the global warming, the situation in African has been aggravated (George, Corbishley,
Khayesi, Haas & Tihanyi, 2016).
2.1.3. IB research about African countries
After gaining political independence in the 1960s, African countries were like most
developing nations which were very doubtful about the virtue of free trade and investment
(Dupasquier & Osakwe, 2006). As the result, in the 1970s and 1980s, several countries in
Africa imposed trade limitation and capital controls as part of a policy of import-substitution
industrialization (Dupasquier & Osakwe, 2006). The now substantial evidence reveals that the
inward-looking development strategy discouraged trade and the foreign direct investment and
had side effect on the economic growth and living conditions in this region (Rodrik, 1998).
Moss, Ramachandran, and Shah (2004) argued that much of African suspicion toward foreign
investment is derived from history, ideology, and the politics of the post-independence period.
Moreover, the policymakers in the region are not convinced the potential benefits of FDI,
which would conduct the prevailing attitudes and concerns in the region (Moss, Ramachandran
potential benefits (Dupasquier & Osakwe, 2006). Therefore, the key challenge of Africa
needed to face is to attract more FDI in dynamic products and sectors with high income
elasticities of demand (Dupasquier & Osakwe, 2006). There is few literature dealing with
issues related to FDI flows to Africa (see for example, Rogo & Reinhart, 2003; Akinlo, 2003;
Lemi & Asefa, 2003; Bende-Nabande, 2002; Asiedu, 2002; and Schoeman et al, 2000).
However, the existing literature aim at the empirical determinants of FDI to the region, with
very little discussion of concrete actions or strategies that could be adopted to promote FDI
flows to the region (Dupasquier & Osakwe, 2006).
2.2. Chinese enterprises
China is the most established state on the planet (Tam & Redding 1993), which has a
long history of more than 3,000 years. The ascent of China is dependably the most fascinating
financial marvel of our time (Lin, 2013). China had been a poor nation for quite a long time
before the change from a planned market economy towards the end of the 1970s (Lin, 2013).
In 1978, its per capita pay was $154 which was even 33% lower than the normal level in
Sub-Saharan African nations (Lin, 2013). Despite this, 1978 marked as another beginning of radical
changes of the Chinese economy (Anderson, Li, Harrison & Robson, 2003). The Chinese
government made an open-door approach and executed the financial changes (Davies 1995).
From that point forward, China's economy has changed significantly. The yearly GDP
development was 9.8% as finished at the 33-year time span and the yearly universal exchange
development was 16.6% on average (Lin, 2013). These days, China is an upper middle-income
country, with a per capital GDP of $8582.94 in 2017; more than 700 million individuals have
gotten away destitution, which takes up about three-fourth of the entire population on the planet.
In 2009, China outperformed Japan to be the second-biggest economy and supplanted Germany
to be the biggest exporter of stock in the world (Lin, 2013). It's estimated that by 2020, the
purchasing power equality and GDP would surpass America to be the largest one (Christoph,
Alon, Chang, Fetscherin & R. McIntyre, 2012).
As the globalization and integration of economy, China unquestionably catch the chance
to perform at the worldwide stage. Amid the most recent two decades, the Chinese endeavours
have been internationalized quickly (Ge & Wang, 2012). From 1990 to 2014, the FDI inflows
and outflows has been raised fundamentally and even achieved 130 billion and 182 billion
separately (Figure 1). It's realized that the Chinese business and their worldwide activities are
run in view of an arrangement of convictions and qualities (Redding, 1990). Information from
the latest National Economic Census uncovers that the quantity of Chinese private enterprises
has expanded fundamentally amid the time of 2004-2008 with more than 80% development
(China View, 25 December 2009, in Ge & Wang, 2012). At the end of 2008, there was 3.596
million private enterprises in China, which represented roughly 72.5% of all the business
elements (Ge & Wang, 2012). As indicated by the current information, the Chinese private
endeavours create around half of the GDP and they are the essential source of employment
generation (China Daily, 2011).
Figure 1. China’s FDI inflow and outflow (1990-2014)
Source: World Investment Report 2015 20 000.0 40 000.0 60 000.0 80 000.0 100 000.0 120 000.0 140 000.0 160 000.0 180 000.0 200 000.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 FDI, millions of dollar
2.2.1. The internationalization of Chinese enterprises
Johanson and Mattsson (1993: 306, in Ge & Wang, 2012) defined internationalization as
a cumulative process, in which company continually establishes, maintains, develops, breaks
and dissolves relationships aim to achieving the goal of it. Usually, researches on
internationalization are mainly about multinational enterprises from Western countries (Ge &
Wang, 2012). During the recent years, the rise of Asian multinational enterprises has attracted researchers’ attention (e.g., Mathews, 2006; Sim & Pandian, 2003, in Ge & Wang, 2012).
Redding (1990) finds that the Chinese businesses and their international operations are run as
the basis of beliefs and values. Besides, Xie and Amine (2009) found that one of the major
drivers of Chinese enterprises internationalization is their accessibility through the social
network to get information and suggestions about the foreign markets, not only at home country
but also at abroad. Meanwhile, Rauch and Trindade (2002) find that the ethnic Chinese
networks significantly influence bilateral trade between countries, because they provide market
information and the referral services, and act as community enforcement of sanctions. On the
basis of the sample 1,355 Chinese private enterprises, Luo, Zhao, Wang and Xi (2011) find
that the driven factor of the internationalization of Chinese enterprise was dual strategic intents
with seeking the exploitation of firm-specific advantages. Liu et al. (2008) found that the choice
of entry modes of these enterprises with the aim of successively grater control. On the other
hand, Rui and Yip (2008) found that usually the large enterprises achieve their strategic goals
for internationalization by using cross-border acquisitions instead of expanding via sequential
stages.
2.2.2. Relationship between Chinese enterprises and African countries
China now is the largest trading partner of African countries and the trade relationship
between these two has risen dramatically in the last decade (Mlambo, Kushamba & Simawu,
researchers and analysts (Berthelemy, 2011; Davies, Edinger, Tay & Naidu, 2008; Jefferis,
2012; Nkurunziza, 2010; Thompson, 2005; Wang, 2009; in Mlambo, Kushamba & Simawu,
2016) conclude that the China-Africa relations bring various of positive developmental
outcomes to both China and Africa. It’s often argued that the relationship between Chinese
FDI and the overall trade with Africa is extremely strict (World Bank, 2004). As illustrated in
Table 1, China is with an intention of resource seeking in Africa for extracting natural resource such as oil, petroleum, and mineral. China’s key imports in 2012 was mineral products which
took up 55% of China’s total imports from Africa (Tralac, 2013, in Mlambo, Kushamba &
Simawu, 2016). And additionally China is bringing a lot of manufacturing products to Africa
such as fabrics, footwear, and electric appliances (Mlambo, Kushamba & Simawu, 2016).
Meyersson et al. (2008) find that the resource exporting from African countries to the world
has no impact on African growth, however, the exporting natural resources to China has
significantly positive effect on economic growth and investment in Africa. Baliamoune-Lutz
(2011) also supports that African countries benefit more in terms of growth by both exporting
primary products to China or importing from China.
Table 1. Composition of Trade
Countries
Share in China-Africa trade (in %) Exports to China Imports from China Angola 21 Crude oil, diamonds, refined Petroleum, refined natural gas Mechanical and electrical products, machinery, construction material South Africa 18 Diamond, iron ore and concentrates, copper, platinum Cotton, fabrics, woven, footwear, travel goods Sudan 7 Crude oil, petroleum gases
Outer garments and clothing, tubes and
pipes, steel, electronic equipment
Nigeria 6
Crude oil, ore, petroleum, gases, non-ferrous base metals Footwear, motorcycles, batteries and accumulators, electronic components Egypt 6 Oil, cotton, chemicals, metal products Food, equipment, construction material, electronic components, electric generators Algeria 5 Mineral fuels, plastic and products, copper, cork Construction material, mechanical appliances, machinery, electronic product, vehicles and parts,
ceramic
Source: MOFCOM and UNCOMTRADE in Cisse (2012)
The main motivation for Chinese firms to invest in Africa is resource-seeking and
market-seeking (Sanfilippo, 2010). Cheung et al. (2012) confirm that the motivation about
resource-seeking of China and also find that the potential market, intense trade and existing
Chinese contracted projects are all attractive for China to invest in Africa. In the recent years,
the investment done by China in Africa has increased dramatically. Table 2 illustrated the China’s overseas direct investment (ODI) in Africa, which increased from $ 31.7 million in
2004 to $549 million in 2008. Besides, China’s ODI stock in Africa showed a considerable
increase as well, rising from $159.5 million in 2005 to $ 780.3 million in 2008. There is some
evidence that investment made by private Chinese enterprises in Africa is steadily increasing
(Gu, 2009; Shen, 2013, in Busse, Erdogan & Mühlen, 2016). Moreover, Shen (2013, in Busse,
Erdogan & Mühlen, 2016) finds that private Chinese FDI brings plenty of opportunities for job
creation.
Table 2. China’s overseas direct investment in Africa, 2004-2008
Year Net Overseas Direct Investment $US million
Overseas Direct Investment Stock $US million
2004 31,742 …
2005 39,168 159,525
2006 51,986 255,682
2007 157,431 446,183
2008 549,055 780,383
Source: National Bureau of Statistics of China. http://www.stats.- gov.cn/english/
Biggeri and Sanfilippo (2009) discussed about the two dominant economic channels, trade and FDI but it’s more about the analysis of how these two intertwined. Busse, Erdogan
and Mühlen (2016) also analyse the individual impact of these two channels on growth. Entry
mode choice is always one of the most vital decisions for companies with the intention of
global expansion (Xu, Hu & Fan, 2011). However, besides the trade and FDI, there are usually
many other types of entry mode for enterprises to choose, such as contractual arrangements
like licensing and franchising, joint venture (JV) and wholly-owned subsidiary (WOS).
Additionally, the existing literatures do not include all the channels at once, and those are more
likely to investigate the individual determinants and effects of each channel (Busse, Erdogan
& Mühlen, 2016), not to say about the whole channels of Chinese enterprises solely. Even
though the engagement of China in Africa has received significant attention (Busse, Erdogan
& Mühlen, 2016, as cited in Goldstein et al., 2006; Kaplinsky et al., 2007; Asche and Schüller,
2008; Morrissey and Zgovu, 2011, in Busse, Erdogan & Mühlen, 2016), but few researchers
aimed at this topic.
2.3. Entry mode
The entry mode choice is one of the most significant decisions in a firm’s
internationalisation stage (Agarwal & Ramaswami, 1992), which refers to the way how a firm
2004) and the level of the engagement in a foreign market (Shen, Puig & Paul, 2017). In the
former researches, Musso and Francioni (2014) reveal that the decision of entry mode is
complicate and requires considerations from various aspects, which is influenced by both
external and internal factors (Shen, Puig & Paul, 2017). Moreover, the consequence of this
decision making is closely linked with the success of the investment (e.g., Brouthers, 2002,
2013; Hill, Hwang & Kim, 1990). As once this choice has already made, it’s difficult to change
due to the considerable loss of time and money (Root,1987). Consequently, many researchers
think entry mode is a multifaceted decision which involves the assessment of various aspects
like uncertainty and risk, control, commitment, estimated returns and other strategic objectives
(Anderson & Gatignon, 1986; Brouthers & Hennart, 2007; Ji & Dimitratos, 2013). In the
context of emerging economies, the real selections aspects of equity commitment supplement
the theories of enterprises strategies and offer an original framework to investigate the impact
of uncertainty on expansion choices (Hoskisson, Eden, Lau & Wright, 2000; Brouthers,
Brouthers & Werner, 2008). Wei, Liu and Liu (2005) proved that the location, firm, and industry specific factors influences the Chinese enterprises’ entry mode choice by classify the
choices in two categories – equity (JV and WOS) and non-equity (contractual and licensing).
Pan and Tse (2000) develop a hierarchical model of entry mode, in which equity and
non-equity modes have different requirements in investment and different level of control. In
specific, the non-equity entry modes require lower level of control and less investment than
equity entry model (Anderson & Gatignon, 1986).
When refers to the entry mode choice, researchers usually identify the factors at both
firm- and host country- level which have impact on the costs and profits related with all the
alternative modes (Demirbag, Tatoglu & Glaister, 2009). Some of the researches at the firm-level such as firm’s intense research and development (Kogut & Singh, 1988; Padmanabhan &
Brouthers, 2000; Caves & Mehra, 1986; Hennart & Park, 1993, in Demirbag, Tatoglu &
Glaister, 2009); level of product diversity (Barkema & Vermeulen, 1998; Caves & Mehra,
1986, in Demirbag, Tatoglu & Glaister, 2009). Some at the host country-level such as the
development and size of host country (Brouthers & Brouthers, 2000; Padmanabhan & Cho,
1995). However, the impact of firm size of parent company and firm experience are also
significant to the entry mode choice of a company.
In the developed economies with free-market institutions, size may be a symbolic of
market power, slack, capability and market credibility (Haveman, 1993; Park & Luo, 2001;
Pfeffer & Salansik, 1978, in Shinkle & Kriauciunas, 2009). Large-sized firms always can
benefit from its size-related advantages such as more easily and quickly to gather information
and detect profitable opportunities (Ge & Wang, 2012). Bonaccorsi (1992) finds that most
firms will explore the export markets after they capture a large market share in their home
country with a certain level of age and size. Compared to small-sized firms, large-sized firms
are more able to develop their resources and functions internationally (Ge & Wang, 2012).
Because of these advantages, large-sized firms are more able to adapt a new market.
According to the behaviour learning theory, the organizational learning provides one
route for firms to acquire the knowledge which is based on the internationalization decisions
and strategy (Bruneel, Yli-Renko & Clarysse, 2010). Generally, the routines can be the
competitive advantage of a company and are always vital to formulate a firm’s strategic choices
as supplementation, or even substitute for calculative and formal strategic decision-making
rules (March, 1999). Moreover, firms generally gain competence and expertise via
accumulating experiences (Haleblian, Kim & Rajagopalan, 2006). Researches reveal that firms
are more likely to repeat the previous actions as they believe the experience accumulated from
prior activities. Therefore, when firms do entry mode choice, they are more likely to repeat
Definitely, as for successful practices, enough organizational resources are needed (Joo
& Kim, 2004, in Zhang, Wei & Zhou, 2018). Some researchers regarded organizational slack as potentially utilizable resources which can be redeployed to achieve firm’s goals (Daniel et
al., 2004). Firms can get ready to start and implement strategic changes to adapt to the external
environment (Zhang, Wei & Zhou, 2018). Besides, there are four categories of slack resources
proposed by Vpss et al. (2008): financial slack, operational slack, customer relational slack and
human resource slack. Different from other slack resources, financial slack is more flexible
which firms can easily use in various activities or new project (George, 2005, in Zhang, Wei
& Zhou, 2018). Moreover, financial slack is also easier to be converted into other kind of slacks
(Dollinger, 1999, in Zhang, Wei & Zhou, 2018). Consequently, firms with higher level of
financial slack give more support for themselves to do internationalization.
2.4. Research gap
Based on the results of the literature review discussed about, the impact of firm size and
firm experiences remains a subject for discussion. Previous research has significantly
confirmed the advantage of large-sized and experienced firms in entry mode choice. However,
a large amount of researches are investigate the impact of firm size and firm experience in a
general aspect or the researchers focus more on the investment of Chinese enterprises in the
internationalization (Cui & Jiang, 2009; Liu, Buck & Shu, 2005), some may do the research
about the factors which influence the performance of Chinese enterprises in the African
continent (Wang, 2009). Few write about the factors which influence the entry mode choice
besides the FDI when Chinese enterprises enter into the African countries (Lin & Farrell, 2013). It’s complicated to analysis all the entry mode via same standards, consequently, equity
commitment would be a good aspect to represent the different level of entry mode which has
an implication of control and investment requirements from subsidiaries. Definitely, it’s
ranking lists in the international business industry is the Global Fortune 500, and China has
already been the second largest owner of the Global Fortune 500. Thus, those Chinese
enterprises in the Fortune global 500 is the main sample in this thesis.
The purpose of this article is to bridge this gap to shed light on the specific relationship
between firm size with firm experience and equity commitment of Chinese enterprises. Stated
otherwise, the aim of this study is to provide answer to the research question: How the key
factors influence the entry mode choice of the Chinese enterprises in African market?
Furthermore, the study discusses moderating effect of financial slack on these relationships.
3. Theoretical framework
3.1. Firm size
Typically, firm size influences the pace of organizational internationalization and
resource commitment (Ge & Wang, 2012). During the internationalization, parent firms often
have sequential relational and informal governance mechanisms on the basis of prevalent
kinship ties, for example sharing values and communicating within the family (Pieper et al.,
2008). Ge and Wang (2012) find that medium- and large-sized enterprises are able to do
internationalization faster and make greater resource commitments than the small firms, which
is in accordance with the traditional view that the larger-sized firm usually have size-associated
advantages used for international investment. Meanwhile, Shinkle and Kriauciunas (2009)
suggest that firm size has a positive impact on the export growth. Additionally, large firms are
supposed to expend resources and absorb risks more than small ones (Erramilli & Rao, 1993). It’s generally known that the African area is resource-endowment. Most of the enterprises
choose to enter into the African market with the motivation of resource seeking and market
seeking (Anyanwu & Yameogo, 2015). According to the above literature, compared with the
How to effectively utilize the African resource to gain the market share is one of the most
important skills for the enterprises.
Bain (2017) finds that the domestic African enterprises are lack of talent, and most of
them are prefer to work with their families. Different from the indigenous enterprises, the
international companies usually have experts and more advanced technology. From the
traditional international business view, firm size is beneficial because the large-sized firms are
more likely to process what the internationalisation needs, such as the knowledge, resources
and credibility (Dunning, 1980, 1988; Reuber & Fischer, 1997). Additionally, firm size is an
important attribute, which shapes the internal ability behaviour of firms and simultaneously
interacts with the external environment (Evans, 1987; Haveman, 1993; Kimberly, 1976). On
the contrary, smaller firms are simplified in decision-making (Chen & Hambrick, 1995). And
compared with large-sized firms, these small firms are always younger and more innovative
(Stock et al., 2002). Consequently, insufficient resource, simplified decision-making process
and greater propensity in innovation all have impact on the internationalization of smaller firms.
In sum, the larger the firm size is, the easier they will do in the internationalisation stage
with sufficient resource and competence. Thus, different from the small-sized firms, the
large-sized firms have more mature governance mechanisms and are more able to invest and control
their foreign subsidiaries. Taking these considerations into Chinese enterprises, the first
hypothesis in this research thesis is:
H1: Chinese firm’s size is positively related to its equity commitment when investing in
Africa.
3.2. Firm experience
Suitable knowledge may be arising from its experience (Levitt & March, 1988). The prior organizational literature provides sufficient evidence that once an organization’s members get
previous actions (Amburgey, Kelly & Barnett, 1993; Shaver, Mitchell & Yeung, 1997).
Moreover, the researches in the organizational learning imply that no matter what the
consequences of the action is, it’s more likely for a firm to repeat the action because of the
accumulation experience from the strategic decision (Amburgey & Miner, 1992; March, 1981).
Besides, Reuber and Fischer (1997), Ganotakis and Love (2012) reveal that during the
entering and succeeding in international markets, different kinds of managerial skills are needed. And those managers’ experience is part of the knowledge of a company. The
recruitment of managers who has international experiences represents building a direct
connection of internationalization understanding with the firm, and it’s increase the probability
of the extent of internationalization at ceteris paribus (Love, Roper & Zhou, 2016). Pennings,
Barkema, and Douma (1994) confirm that the current successful expansions generate future
prosperity. Kogut (1981) reveals that the new subsidiaries can benefit from the experiences of
parents and also learn from the previous foreign activities. Besides, many researches find that
the prosperity of foreign subsidiaries is influenced by the experience of parent company
(Johanson & Vahlne, 1977; Newbould et al., 1978; Wilson, 1980). These all provide evidence
that the prior experiences are significant for the decision-making of firm’s internationalization
expansion. African area is different from others, which is the most populous continent in the
world (World Population Review, 2017), but at least 70% (31 out of 44 countries) of African
countries cannot achieve their goals of Education for All by 2015 ("Education for All in Africa
| United Nations Educational, Scientific and Cultural Organization", 2018). This means the
labor in the African area is enough but less-educated. Thus, it’s difficult for enterprises to
training their domestic employees, which would influence their control of the whole
subsidiaries in Africa. Moreover, Africa is enriched with both natural and artificial resources
(AFDB, OECD & UNDP, 2015). To make an effective use of resource with protecting the
experienced company are more able to handle the problems and utilize the former experiences
to expand their market in the African area with enough control and investment definitely.
The commercial and managerial experience all positively influence the
internationalization of a firm. Besides, in such a competitive market, the more experienced
firms are more likely to make an excellent expansion strategy with adaptable control and
investment. Therefore, conducting these literatures into Chinese enterprises, the second
hypothesis in this article is:
H2: Chinese firm’s experience is positively related to its equity commitment when
investing in Africa.
3.3. Financial slack
Financial slack is not only the excess circulating fund of firms but also means the
potential money of a company (Wang & Cheung, 2004). A firm can do everything to improve
its competence with enough money, such as hiring specialists or buying new equipment
(Danneels, 2008). Meanwhile, O’Brien (2003, p. 420) find that the financial slack plays an
important role in firms competing based on the innovation. Others also argued that the slack
facilitates firms to do purchasing and adopting innovations (Damanpour, 1987; 1991).
As mentioned above, the talent in the African area is scarce, and the motivation of most
companies to enter into African market is resource-seeking. As the first hypothesis generated,
the large-sized firms are more able to utilize the resource in Africa. However, with higher level
of financial slack, the large-sized firms can improve their competence, they can hire more
talents to work in the African subsidiary. Meanwhile, those large-sized firms can prepare more
advanced machines or import more mature technology to African subsidiaries for making good
use of the domestic resource. Financial slack helps companies to strengthen their business in
Africa and then to improve their equity in the African area. With higher level of financial slack,
subsidiaries. In sum, take these into consideration, the financial slack could be the moderator
to strengthen the relationship conducted on hypothesis one. Therefore, the third hypothesis in
this thesis is:
H3: Chinese firm’s financial slack positively moderates the relationship hypothesized in
H1.
Furthermore, not only providing the autonomy and resources to explore new solutions
and opportunities for firms, financial slack also facilitate risk taking (Kim, Kim & Lee, 2008).
Cyert and March (1963) show that the increasing organizational resources support firms to
engage in experimentation, risk taking and innovation more. As conducted above, the African
market is full of challenge and competitiveness. Taking the consideration of problem solving,
the more experienced companies are better in doing business than the less-experienced one.
Thus, those experienced companies are more willing to invest in Africa and can control their
subsidiaries better. Furthermore, with the support of a high level of financial slack, those
experienced companies can hire more experts to train the domestic employees with offering
professional knowledge. Moreover, due to those experienced companies have enough money
to improve their competence, they are more able to handle the difficulties. With the support of
strong financial slack, for example, they can build an improved regulation to protect their patent
to against the artificial resource of the domestic market. Meanwhile, according to the protection
of their own products and the training of the domestic employee, those experienced companies
would gain prosperity in African market. As the consequence of the above analysis, and on the
basis of the second hypothesis, financial slack reinforces this relationship. Then the fourth
hypothesis is:
H4: Chinese firm’s financial slack positively moderates the relationship hypothesized in
Figure 2: Conceptual model
4. Methods
4.1. Sample and data collection
This empirical research is based on the analysis of Chinese enterprises included in the
Global Fortune 500 list from 2017. Different from the former decades, China has already been
the second largest owner on the Global fortune 500 list, including 115 enterprises in total. All
the data related with those enterprises can be found in Orbis and the corresponding annual
report related to 2016. And then all the 115 enterprises are concluded in the excel, including
the corresponding assets, equity, number of employees, subsidiaries, shareholders and many
related information. In total, there are 6980 subsidiaries at the first level of these 115 enterprises
with all the relevant information. After deleting all the missing values, 99 enterprises with all
the information are left.
4.2. Variables and measures
4.2.1. Dependent Variable
Level of equity commitment is the dependent variable in this study, which refers to the
the foreign market with different modes, the level of equity commitment represents their impact
on the foreign subsidiaries especially the requirements of control and investment. Therefore,
this variable is measured by the percentage of equity in the foreign subsidiaries, which goes
from 0 to 100. Definitely, this study draws on the available data of those Chinese enterprises
in the list of Global Fortune 500. 0 represents that this Chinese company has no foreign
subsidiaries.
4.2.2. Independent Variable
The independent variable used in this study is the firm size. The large-sized firms always
can benefit from its large-sized advantage such as exploiting resources. The role of firm size
in internationalization route for a company is extremely significant. However, in the different
researches, there are a lot of different measurements about it. For example, the Global Fortune
500 uses two measurements, sales and profits of enterprise (Dang & Li, 2013). Hence, in order
to operationalize this variable, the number of employees is used (Rajan, Zingales & Kumar,
1999). Another independent variable is the firm’s experience, which refers to how the firm
performs in the international market and accumulated in the activities. Most of the firms are
willing to repeat their former actions and learn from the experience from the parent company.
Stöttinger, Schlegelmilch & Zou (2015) revealed that the number of years since the
incorporation could be used to measure the firm’s experience.
4.2.3. Moderating variable
The moderator used in this study is the financial slack, which is more flexible that firms
can easily use in various activities or new project (George, 2005). As mentioned above, with
higher level of financial slack, companies can hire more experienced experts and buy more
advanced machine, subsidiaries can deal with the challenge and problems they met in the
African market. This variable is measured by the quotient of the equity and the sum of equity
4.2.4. Control Variables
A number of factors are controlled as they may have the potential effect on the level of
equity commitment of Chinese enterprises. First, the investment freedom is controlled, which
refers to the essential right of people to control their own labour and property ("2018 Index of
Economic Freedom | The Heritage Foundation", 2018). In an economically free society, labour,
capital, and goods are allowed to move freely, which brings greater prosperity ("2018 Index of
Economic Freedom | The Heritage Foundation", 2018). The investment of foreign enterprises
in African market is influenced by the level of investment freedom. Different level of
investment refers to different level of equity commitment of Chinese enterprises. In order to
avoid the potential influence from the investment freedom, controlling of this variable seems
to be necessary. And the data related with this variable would be collected from the heritage
website. This website measures this variable from 12 quantitative and qualitative factors, which
grouped into four categories of economic freedom: rule of law (property rights, government
integrity, judicial effectiveness); government size (government spending, tax burden, fiscal
health); regulatory efficiency (business freedom, labour freedom, monetary freedom); and open
market (trade freedom, investment freedom, financial freedom) ("2018 Index of Economic
Freedom | The Heritage Foundation", 2018). Each of these 12 freedoms is graded on a scale of
0 to 100, and the overall score of a country is derived by the average of these freedoms. Second,
the country size of African countries is controlled, which will be measured by the number of
residence. This variable is usually regarded as the potential of a market, the bigger the country
size is, the bigger the potential in the market is. Chinese enterprises are more willing to invest
in a market with huge potential. Consequently, the capital that the Chinese enterprises invest
in African market refers to different level of equity. To avoid the consideration of potential
market effect, controlling this variable is necessary. The last one is the economic growth, which
from one period to another ("Economic Growth", 2018). The economic growth in a market
influence the purchase power of customers, which has impact on the profit of an enterprise.
Market with higher level of economic growth, Chinese enterprises are more willing to invest
in. Besides, with the increase of investment, parent company will strength the control of the
subsidiaries. These would lead to a high level of equity commitment. Therefore, control of this
variable is needed. And this variable can be measured in nominal or real terms. traditionally,
gross national product (GNP) is used to aggregate economic growth ("Economic Growth",
2018). However, in this thesis, GDP is used.
Table 3. Operationalization of Variables
Variables Operationalization Dependent Variable
Level of Equity Commitment The percentage of equity in the foreign subsidiaries.
Independent Variables
Firm Size Total number of employees.
Firm Experience Years of existence from foundation
to the year 2018.
Moderating Variable
Financial Slack The quotient of the equity and the
sum of equity and debt.
Control Variables
Investment Freedom The average of 12 freedoms which
is graded on a scale of 0 to 100.
Country Size Number of residence.
Economic Growth The domestic GDP.
5. Analysis & results
The mean, standard deviation and correlations of the study variables are provided in table
4. The descriptive statistics give the general overview about the sample used in the study. After
removing the missing values, 99 enterprises with 6980 subsidiaries are left in the list. The
Table 4 shows that firm size is positively related to the level of equity commitment (.227, p
< .05). The investment freedom is negatively related to the level of equity commitment (-.286,
p< .05). However, the correlation between the variables are relatively low. Besides, the firm
experience and the financial is positively related with the level of equity commitment but
without significance.
Table 4. Mean, standard deviation and Correlations of study variables
Variables M SD 1 2 3 4 5 6 7 1. Firm size 137117.4 135446.8 1 2. Firm experience 25.28 18.198 0.147 1 3. Level of equity commitment 37.776 43.077 .227* .168 1 4.Financial slack 0.384 0.501 0.01 .028 0.002 1 5. Investment freedom 48.81 19.791 0.051 -.018 -.286* -0.04 1 6. Country size 20.174 29.258 -0.046 .046 -0.004 -0.026 -.285* 1 7. Economic growth 163.982 320.438 -0.129 -.063 -0.033 -0.012 -0.229 .596** 1 *. Correlation is significant at the 0.05 level (2-tailed).
**. Correlation is significant at the 0.01 level (2-tailed).
The Ordinary Least Square (OLS) method is used in this study for testing the hypotheses.
The independent variables, namely firm size and firm experience, are investigated separately.
Table 5 represents the summary of the results in this study, including 5 models for the level of
equity commitment as the dependent variable. The standardized beta coefficients, their
standard errors, the level of significance as well as general information regarding the model fit
are given for each model in the Table 5.
In order to investigate the impact of the independent variables, namely the firm size and
firm experience, on the level of equity commitment, a hierarchical multiple regression is used.
control variables to predict the level of equity commitment. Model 1 shows that the control
variables used in this study explain 5.9 percent of the variance in scale as the dependent variable.
However, the model is not statistically significant (F = 2.002; p = .119). As for the control
variable, only the investment freedom plays a significantly negative impact on the level of
equity commitment (ß = -.253; t = -2.431; p = .017), which means that the increase of the
investment freedom would lead to a decrease of the level of equity commitment. Contrary to
expectations, the country size and the economic growth do not be significant in this study
because both variables are not significantly related with the level of equity commitment.
In the second step of the hierarchical regression, as shown in the model 2, the independent
variable firm size is introduced. After controlling for all control variables used in this study,
adding the firm size to the model leads to a variance of 11.3 percent that is explained by all the
predictor variables (R2 change = .054; F = 5.701; p = .019). The relationship between the firm
size and the level of equity commitment is positively and statistically significant (ß = .234; t =
2.388; p = .019). Consequently, the results support the hypothesis 1, which is accepted.
Model 3 shows the independent variable firm experience introduced into the model after
controlling all the control variables used in this study, which leads to a variance of 8.6 percent
that is explained by all the predictor variables (R2 change = .027; F = 2.737; p = .101). However,
the relationship between the firm experience is not significant. Therefore, the results do not
give support for the hypothesis 2, which is rejected consequently.
In the next step, model 4 added which including all the independent variables, namely
firm size and firm experience. After controlling for all control variables used in this study,
adding both the firm size and firm experience to the model results in a variance of 13.1 percent
that is explained by all the predictor variables (R2 change = .072; F = 2.797; p = .021).
Moreover, model 4 reveals that the relationship between firm size and level of equity
the hypothesis that the larger the firm size is, the higher the level of equity commitment is,
which empirically validates Hypothesis 1. Additionally, the results in mode 4 also reveals that
firm experience is not significantly related to the level of equity commitment, which confirms
the results in mode 3 and fails to empirically validate the hypothesis 2.
Before testing the moderation effects of financial slack on the relationship between the
level of equity commitment and respectively firm size and firm experience, the two
corresponding interaction terms are computed. For this reason, the moderation variable of
financial slack is multiplied separately by independent variables.
In the fourth step, hierarchical multiple regression is used to analyse the moderation
effect of the financial slack on the relationship theorized in hypothesis 1, with measuring all
the corresponding variables. The results are presented in Model 5 of Table 4. Besides the
control variables as well as the independent variable, the moderation variable of financial slack
and the computed interaction term between the independent variable and the moderating
variable are added. As shown in the Model 5, the entering of the financial slack is negatively
related to the level of equity commitment without significance (ß = -.009; t = -.081; p = .935).
Moreover, the results of the interaction term between the financial slack and the firm size are
not statistically significant (ß = -.001; t = -.009; p = .070). As the result, the findings suggest
that the financial slack does not moderate the relationship between the firm size and the level
of equity commitment. Thus, hypothesis 3 is rejected.
The last model investigates the moderating impact of financial slack on the relationship
between the firm experience and the level of equity commitment. In order to test the hypothesis
4, the regression includes all the control variables, the independent variable, the moderating
variable as well we the interaction term between the independent variable and the moderator.
The results show that there is a positive relationship between the financial slack and the level
interaction term between the financial slack and the firm experience are statistically significant
(ß = -.969; t = -2.501; p = .007). However, the relationship between the interaction term and
the dependent variable is negative, which is not support for the hypothesis 4. Thereby, the
hypothesis 4 is rejected.
Table 5. Summarized Results of Regression Analyses
Variables
Dependent variable: Level of equity commitment
Model 1 Model 2 H1 Model 3 H2 Model 4 Model 5 H3 Model 6 H4 Control Variable Investment freedom -.253*(.285) -.260*(.278) -.251* (.282) -.257*(.277) -.257*(.282) -.236*(.272) Country size -.039(.234) -.051(.228) -.058 (.233) -.065(.228) -.065(.232) -.095(.224) Economic growth -.061(.021) -.029(.021) -.040 (.021) -.014(.021) -.014(.021) .009(.020) Independent Variable Firm size .234* (.000) .215*(.000) .216(.000) ,168(.000) Firm experience .164 (.235) .134(.233) .134(.240) .356**(.309) Moderating Variables Financial slack -.009(9.778) .899*(32.265) Financial slack x Firm size -.001(.000) Financial slack x Firm experience -.969*(.863) Model Fit N 99 99 99 99 99 99 R2 .059 .113 .086 .131 .131 .187 Adj. R2 .30 .075 .047 .084 .064 .124 F-Value 2.002 5.701 2.737 2.797 1.956 2.984 P-Value .119 .019 .101 .021 .070 .007
6. Discussion
In response to the business of Chinese enterprises in the African market, researcher stated
to extensively investigate the consequences of this gap. This study analyzed how firm size and
firm experience influence the level of equity commitment. Moreover, the moderating impact
of the financial slack was included. The statistically results support a significantly positive
effect of the firm size on the level of equity commitment. In other words, a bigger level of firm
size is positively related to the level of equity commitment in the foreign subsidiaries. However,
the results do not provide statistically significant evidence regarding the firm experience and
the moderating roles of financial slack. In the following sections, the finding of this study will
be discussed on practical perspective. Additionally, the limitations of the analysis as well as
the suggestions for the further research are presented in the last section.
6.1. Practical relevance
In the nowadays, more and more enterprises are chasing the trend of internationalization,
which brings a lot of opportunities and profits for their own. African used to be the poorest
continent in the world. However, with the intention of market seeking and resource seeking,
plenty of international companies are willing to go there to expand their business. China as the
second largest economy in the world, especially with the policy of ‘one belt one road’, Chinese enterprises are all ‘going out’ with the support of the Chinese government. African is the most
popular destination of those Chinese enterprise. The cheap labor, abundant resources and huge
potential in African market are full of attractiveness.
The findings in this research give suggestions for Chinese enterprises when they operate
business in African market, especially from the managerial perspective. The statistically results
give support for the positive relationship between firm size and level of equity commitment.
When those Chinese enterprises chose to enter into the African market, the managers firstly
this research does not suggest the positive impact of firm experience on level of equity
commitment. Therefore, the findings from this research suggests the managers in Chinese
enterprises should not solely focus on the former experiences to make the internationalization
strategy in Africa. Moreover, this paper rejects the financial slack as moderating factor on the
relationship between firm size and level of equity commitment. Meanwhile, this paper find that
the financial slack has negative effect on the relationship between firm experience and level of
equity commitment. Because of the significant role of financial slack on the decision-making
in a company, most of the Chinese enterprises strongly rely on their financial slack. However, it’s better for Chinese enterprises to shrink the importance of financial slack when they make
strategy of entering into African market.
6.2. Limitations & Future Research
In this thesis, there are three limitations. Firstly, the differences among datum in this
study is huge, which have impact on the statistically analysis. Especially in the firm size item,
which is measured by the number of employees. Because of the differences of number of
employees between enterprises are big, the researcher is difficult to category the numbers into
group. Second, most of the Chinese enterprises in the Global Fortune 500 are stated-owned
enterprises, which have no foreign subsidiaries. Therefore, the level of equity commitment of
those companies would be zero, and then influence the late analysis. Thirdly, the control
variable in this study seems to have little impact on the dependent variable. All of the three
control variables negatively influence the dependent variable and two of them even do not
correlated with the dependent variable significantly. Therefore, in the future research, the
researchers could take consideration of other control variables. Moreover, the researches could
divide the Chinese enterprises into private-owned and stated-owned to investigate their
subsidiaries as the conditions of these two kinds of enterprises are quite different. The
high technology, high speed railway, etc, cooperate with the foreign governments directly
without building subsidiaries or doing business with local companies. For example, the China
Railway Engineering Corporation accepts the projects of building the high-speed railway in
America, Morocco, Thailand, and numerous other countries. Most of the state-owned
enterprises have no foreign equity commitment, thus, the data collection from those enterprises
has statistically impact on the final results. Therefore, the future researchers had better to make
an analysis in two different groups.
7. Conclusion
The goal of this empirical work was to provide insights into the consequences of factors of Chinese enterprises on firms’ internationalization. Previous literature has little investigation
about the decision-making of Chinese enterprises in African area. Moreover, the effect of firm
factors such as firm size and firm experience rather unexplored. Therefore, this study
investigated the question of how the key factors influence the entry mode choice of the Chinese
enterprises in African market. In addition. The moderating effects of financial slack was
discussed. While previous researches give support for the significance of financial slack,
literature has not yet focused on the potential moderating roles of it.
The presented theoretical framework is empirically tested using the data from the Orbis
and the corresponding annual report of the year 2016, comprising an extensive sample of
Chinese enterprises in the Global Fortune 500. With the aim of investigating the proposed
effects, hierarchical multiple regression analyses are used in this study. The finding suggest
that the firm size of Chinese enterprises have a significantly positive impact on level of equity
commitment, whereas no significant results were found regarding the hypothesized firm
experience and moderation effects of financial slack.
As a consequence, this study contributes to previous literature by providing empirical
level of equity commitment. Due to tthe importance of Chinese enterprises and the difference
of African market, factors in the Chinese enterprises gaining an increasing attention. Therefore,
this study makes an important attribution by expanding the knowledge of explicit impact of
firm size and firm experience on the level of equity commitment. Based on the results obtained,
this study also provides significant implications for the managerial decisions of Chinese
enterprises when doing internationalization. While the variances between stated-owned and
private-owned Chinese enterprises are big, the data used in this research is in a big difference
especially the firm size. On the basis of the findings and the limitations of this present analysis,
Acknowledgement
I would like to appreciatively acknowledge the support from my supervisor Dr. Niccolo’
Pisani. He usually gives me a lot of valuable comments and feedback. It’s really important for me to write my Master’s Thesis.
