Master Thesis
A single (Chinese) picture or a complex on: State-owned
Multinational Enterprises from Emerging Markets
By: Danial Saliba Student number: S3243338
Groningen, 21.06.2017
University of Groningen Faculty of Economics and Business MSc. International Business and Management
Table of Content
Abstract 1
1.Introduction 2
2.Literature Review 4
2.1 Internationalization & Motivation 4
2.2 Emerging Markets MNE 7
2.3 Emerging Markets state-owned Multinationals 9
3. Method 13
3.1 Comparative Case Study 13
3.2 Sample 14
3.3 Data collection 15
3.4 Data analysis 16
4. Case & Results 17
4.1 Governmental intervention in business activities 19
4.2 Time and location to start internationalize 25
4.3 Choice of countries 26
4.4 Choice of entry mode 28
4.5 Speed of internationalization 30
4.6 Comparison 31
5. Discussion 32
6. Conclusion 37
7. Limitations & Future Research 40
References 41
Abstract
1. Introduction
The internationalization of emerging market multinationals enterprises (EM MNE) has been well discussed in the International Business literature over the last three decades (Luo & Tung, 2007; Benito, 2015; Guillén et al., 2016; Dunning, 1993; Johanson & Hilmersson, 2016; Cuervo-Cazzura, 2008; Cuervo-Cazzura & Narula, 2015). In relation to the field of emerging markets, the literature has begun to point the lens on the undeveloped studies of emerging markets state-owned multinational enterprises (EM SMNE). The literature describes state-owned enterprises (SOE) as a hybrid entity: it has the role of a business entity, but also that of a political agent (Peng et al., 2016; He et al., 2016; Cui & Jiang, 2012). The function of the SOE is determined by the state, however most SOE trade relates to natural resources and the provision of basic goods (Bass & Chakrabarty, 2014). Deriving from the ownership and thus influence from the state, SOE lack managerial autonomy and market-orientation, since their primary function is to stabilize and stimulate the national economy by providing resources and generating growth. Governments can therefore intervene in their national economy using their business entities as a vehicle for doing so. Therefore, an SOE can be understood as fiscal macro-economical instrument (Li et al., 2012). This characteristic is especially interesting for emerging market countries that need a certain degree of growth to stabilize and develop their economies.
assets (Li et al. 2012). In comparison to classic internationalization models, such as the incremental UPPSALA model, the internationalization process and the geographical decision is not limited to a specific regional basis (Johanson & Vahlne, 1977). Instead, the decision of which country to enter is derived from the SMNE objective, more precisely where the governmental agent can successfully fulfill its mandate. This focus on achieving a government mandate by focusing on a sole purpose results in a limited willingness of the SMNE to fully integrate in its host market. Additionally, host countries may fear that SMNE FDI may abuse its influence in terms of the local economy in order to gain a market advantage, which could negatively impact local businesses (Cui & Jiang, 2012).
The illustrated theoretical framework reflects the main results of actual SMNE research. The young SMNE literature derived a large part of its implications from Chinese SMNE and FDI studies. I reviewed seventeen of the leading SMNE articles; all of them referred to and reviewed Chinese SMNE. Nine of the seventeen are direct SMNE Chinese studies (see Appendix, Exhibit 1). Other authors such as Xu & Meyer (2013) or Tonurist & Karo (2016) also noted that the current EM and SMNE literature has a dominant focus on China and its entities. The Chinese SMNE benchmark studies emphasize an aggressive internationalization process in order to exploit foreign resources for the home country and leverage political influence (Bass & Chakrabarty, 2014; Deng, 2009; Shi et al., 2016; Cui & Jiang, 2012, Buckley et al., 2007). The young EM SMNE literature has adapted and draws an extremely negative image of EM SMNE FDI, implying mainly nationalistic interest such as global sourcing to secure home country wealth, take priority in the internationalization process. This emphasis on the Chinese model of internationalization ignores to take into account the unique institutional background of China and its associated interest, to the extent that it ignores other EM institutions and SMNE.
Furthermore, I would like to offer new insights into EM SMNE internationalization patterns in order to help develop the full picture and pave the way for further research. In aid of this goal, my research question focuses on whether EM SMNE internationalization patterns are different and, if so, in what way? In order to answer this question, I conducted a comparative case study of Brazilian, Indian and Chinese SMNE to analyze and test their internationalization characteristics and extent of government intervention in their activity. I identified five major indicators that enable the analysis of the internationalization process and motives: governmental intervention in business activities, time and location to start internationalization, choice of countries, choice of entry mode, and speed of internationalization.
The study is structured as follows. Firstly, I will provide an overview of the leading internationalization theories. I will then illustrate the specific motives of emerging market MNE to internationalize. Following this, I will discuss the role of leading EM SOE and -SMNE literature and examine its major arguments. In the method section, I will explain why I chose to conduct a case study. Followed by the case study where I provide my analysis and comparison of my findings. In my discussion, I will apply my research findings to the existing literature, and then I will conclude by pointing out how I have contributed to this field of research. Finally, I will point out the limitations of my study and future research fields.
2. Literature Review
2.1 Internationalization & Motivation
fear of internationalization and a fearless mindset that speeds up internationalization (Kudina et al., 2008). The consequence of this objective is that greater risk-taking acquisitions are conducted in order to gain quicker access and control (Liu, 2015). The aggressive approach can therefore be characterized by rapid world-wide internationalization, achieved via risk-taking acquisition transactions in order to establish access to markets and the required assets and resources.
Beyond the mentioned approaches, a further distinction can be drawn between vertical and horizontal motives in relation to cross-border expansion. Vertical expansion refers to the organization of the supply and value chain, which aims to exploit competitive advantages by means of resource allocation and profitability, for example, through a specific organization of production and distribution. Horizontal expansion refers to the issue of expanding business into foreign markets in order to reduce costs of host market treatment and meet specific market requirements by the means of, for instance, local plants or commercial subsidiaries (Guillén, et al., 2016).
In connection to the eclectic theory, Dunning (1993) introduced his four FDI internationalization motives: market-seeking, efficiency-seeking, resource-seeking and (strategic) asset-seeking. These have been recognized as the classical motives in explaining traditional MNE internationalization. The market-seeking motive describes the ambition to enter new markets and engage new customers. By doing so, the company may gain scale and scope and expand its market share, enhance its market position, and generate growth. The efficiency-seeking motive deals with the issue of enhancing cost-efficiency by entering foreign countries that provide lower cost-structures, such as low employee cost. The core of these efforts lies in the rationalization and the focus on existing operations. For the third motive of resource-seeking, the primary aim is to get access to specific resources that are not available in the home country or that may lower the costs abroad (e.g. raw material or technology that possesses specific advantageous characteristic). The final motive (strategic)
Table 1. Internationalization approach
Incremental approach Aggressive approach
Speed of internationalization slow rapid Internationalization process step-by-step global & aggressive Choice of location close psychic distance global Market commitment & integration From low to deeper deep
Degree of risk-taking low high
Preferred entry mode Greenfield & JV M&A Primary initiative motive market- & efficiency-seeking resource- & asset-seeking
intangible assets that are critical in the long run to ensure competitiveness. These ambitions are focused on the development of new resources and capabilities (Dunning, 1993). The four seeking modes therefore explain MNE motives to expand and enter foreign countries.
The classic motives can also be linked to the UPPSALA model. The model is more based on market- and efficiency-seeking. The incremental motive explains early stage internationalization based on new market opportunities, but is limited in providing and explaining further motives (Benito, 2015). Furthermore, the incremental approach by Johanson & Vahlne (1977) focuses more on horizontal expansion motives, however in broader sense other motives can be drawn. In general, the incremental approach characterizes an internationalization, which is slow and tends to avoid risk. It begins in close, familiar environments with low commitment modes, whereas the aggressive approach is not limited by psychic distance and opts for a rapid and riskier internationalization process, preferring entry modes such as acquisitions.
2.2 Emerging Markets MNE
The discussed motives to internationalize may vary between developed MNE and new EM MNE, due to the EM MNE ‘latecomer disadvantage’ (Luo & Tung, 2007). Especially, between the 1980s and 1990s, the developing MNE motives changed in order to grow from mere marginal players to world leaders in their respective sectors (Guillén et al., 2016). In trying to catch up, the EM MNE face many obstacles that established MNEs did not have to face, such as the latecomer disadvantage, liability of newness, lack of resources, weak institutional background, as well as less international experience and capability (Luo & Tung, 2007; Guillén et al, 2016; Dunning, 1993). EM MNE still face the dilemma of balancing the need to gain geographic reach but also upgrade their capabilities (Bentio, 2015; Guillén et al., 2016). Therefore, in order to achieve a balance EM MNE have to focus on horizontal and vertical expansion, whereas traditional MNE mostly focus on one dimension only (Benito, 2015). Luo and Tung (2007) argued that EM MNE’s international expansion can be characterized as a springboard to acquire critical resources, strategic assets (like brands with the perspective of gaining reputation) and develop capabilities. By doing so, EM MNE hope to overcome latecomer disadvantages on a global stage by conducting aggressive and risk taking M&A. In particular, EM MNE want to overcome the competitive disadvantages they face due to their lack of global reputation and limited access to technology.
knowledge and experience that EM MNE have. Moreover, in contrast to developed countries’ MNE, new EM MNE go abroad to escape uncertainty in their home market caused by
fluctuations, restrictions and weak institutions. Moreover, EM MNE are often highly
dependent on their home markets, wanting to leverage their core abilities and competences at home by exploring new opportunities (Luo & Tung, 2007; Guillén et al., 2016). To do so, they spread risk via a geographic portfolio diversification while reducing the macro-economical and political volatility of their home country by entering more stable countries (Cuervo-Cazzura & Narula, 2015). Taking account of the mentioned issues, EM MNE do not necessarily follow incremental internationalization, since the need to gain such experience forces them to take bigger steps and internationalize more rapidly (Luo & Tung, 2007). Thus, it is evident that the main difference between EM MNE and MNE is the ambition of the new MNE to catch up due to their insufficient reputation, knowledge, experience, technology, and the dilemma of achieving a greater market presence.
Originating from an emerging market does provide certain advantages to new EM MNE compared to traditional MNE. EM MNE receive more governmental support to develop capabilities and engage internationally in order to become a global player (Guillén et al., 2016). Moreover, new MNE possess greater freedom to adapt new innovations and commerce them in contrast to old MNE, whose organizations are more bounded in their structures. Additionally, due to their less developed home institutions, EM MNE are advantaged in interacting with weaker institutions due to their experience of engaging or entering markets with uncertain conditions because they know the rules of the game (Bentio, 2015; Guillén et
New EM MNEs Traditional developed MNEs
Speed of internationalization Accelerated Gradual
Competitive advantage Weak: Upgrading of resources required Strong: Required resources available in-house
Political capabilities Strong: Firms used to unstable political environments
Weak: Firms used to stable political environments
Expansion path Dual path: Entry into developing countries for market access & developed
countries for resource upgrading
Single path: from less to more distant countries
Preferred entry modes External growth: Alliances, JV & acquisitions
Internal growth: Wholly owned subsidiaries
Organizational adaptability High due to their recent and relatively limited international presence
Low due to their ingrained structure & culture
Table 2. New EM MNE & traditional developed MNE comparison
Overall, the motives to internationalize can change over the time. Internationalization motives must be placed into context, and this context itself changes over time based on the
advancement of the firm or on environmental changes.Additionally, companies do not have
one motive but many interrelating motives. Furthermore, the priorities of the motives are changing as well (Franco et al., 2008; Cuervo-Cazzura & Narula, 2015).
Overall, in comparison to traditionally developed MNE, EM MNE demonstrate deficits arising from their latecomer and competitive disadvantage, resulting from inefficiency, weak institutions, and limited access to critical tangible and intangible assets. To try and overcome these disadvantages, EM MNEs target specific foreign countries in order to exploit and acquire the necessary resources to enhance their capabilities (Hobdari et al., 2017; Guillén et al., 2016; Luo & Tung, 2007).
2.3 Emerging Markets state-owned Multinationals
The literature points out that the characterization of an SOE as a political agent leads to agency problems and higher coordination costs, resulting in inefficiency (Peng et al. 2016; He et al., 2016). According to Cuervo-Cazurra et al. (2014) the main drivers of inefficiency are poor management from non-professional bureaucrats, less market-pressure, bureaucracy, and conflict of social projects. However, EM governments successfully turned their SOE into national champions and now want to turn them into global champions (Shi et al., 2016; Li et al., 2012).
In the context of emerging markets, the extent of the SOE changed in terms of global activity. This change in perspective came from the EM’s necessity to grow in order to stabilize the economy and develop the country, through access to critical natural resources so as to guarantee future growth and wealth (Shi et al., 2016; He et al., 2016). Thus arose a special mandate for SOE to engage in international value-adding activity to generate wealth in terms of natural, financial and technological resources. These would then be channeled back to encourage and boost the home market, and effectively transformed SOE into SMNE. The home government supports its SMNE to engage in further internationalization by providing subsidies such as low-cost capital, guarantees and special rights. The consequence of such government backing and political mandate leads to aggressive and less risk-averse behavior in entering markets. SMNE are also more likely to enter countries by acquisitions to have a rapid market entry, direct access and control over assets and resources. This effect is fostered by the home-market orientation that leads to less host-market commitment (Rudy et al., 2016; Luo & Tung, 2007; Cui & Jiang, 2012).
Table 3. EM MNE and EM SMNE comparison
EM MNE EM SMNE
Function Business entity
(market-driven)
Political agent & business entitiy (state-driven & less market-driven) Liable & subserviently Self-interest
(Shareholder)
National-interest & -needs (Government & Nation) Overall goal Shareholder value & profitability National welfare
Direct governmental influence No Yes
Management autonomy High Low
Perspective of internationalization
Upgrade capabilities & gain geograhic reach
Rapid access to needed resources & assets Expansion path Horizontal & vertical global integration Vertical integration
Speed of internationalization Accelerated Rapid
Preffered entry mode Alliances, JV & acquistions Acqusitions
Luo and Tung (2007) identified two types of SMNE general types: the transnational agent and the commissioned specialist. It is the goal of the transnational agent to exploit global opportunities in order to grow while supporting the economic development at home. The commissioned specialist only focuses on countries where the SMNE can leverage its competitive advantage in order to fulfill governmental mandates. The specialist has only two roles. Firstly, to continue expansion as a legitimate business, and secondly to complete governmental tasks in the corresponding area of expertise (Luo & Tung, 2007). The literature particularly emphasizes the second role of the commissioned specialist, citing Chinese SMNE as demonstrating these characteristics (Buckley et al., 2007; Buckley et al., 2008; Bass & Chakrabarty, 2014; Du et al., 2016). The objective of the two types influences the internationalization process, by targeting such countries that show opportunities and have the required endowments of assets and resources. Therefore, the internationalization pattern is dominantly directed by resource- and asset-seeking motives, but also, to a lesser extent, market-seeking without following a geographic pattern - such as the incremental approach. Moreover, the primary focus on a governmental mandate reduces SMNE freedom of decision-making in terms of location, and limits the company’s potential. It may be the case that government interference leads to sub-optimal decision-making. In this context, the literature illustrates that the main objective of EM SMNE is global sourcing (Bass & Chakrabarty, 2014; Buckley et al., 2007). Thus it can be deduced from the leading SMNE literature that global interactions are solely engaged in order to fulfill government mandates. This limits the willingness of the SMNE to integrate in the local host market, since its core objective is to strengthen the market back home and leverage its position via foreign market exploitation (He et al., 2016; Shi et al., 2016; Cui & Jiang, 2012; Buckley et al., 2008). Cui and Jiang (2012) state that this theory paints EM SMNE internationalization in a negative light, pointing out that this recognition is mainly driven by Chinese SMNE behavior.
3. Method
3.1 Comparative Case Study
In order to investigate my research question, I opted for a qualitative research approach by conducting a comparative case study. The reasoning behind why I chose this method was my motivation to observe specific behavior and characteristics in relation to EM SMNE internationalization process and their governmental interrelations. The past EM SMNE literature primarily derived its results from conducting quantitative research that results in a generalization and simplification of complex EM SMNE relations. In my case, a quantitative approach was not appropriate because I want to examine complex contextual phenomena. The selected approach gave me the opportunity to handle deep and rich information in order to identify theoretical gaps, extend and refine the existing literature literature.
The past SMNE research body predominantly derived motives and behavior of internationalization from observations of Chinese SMNE and -institutional context (Lin & Joang, 2012; Wang et al., 2012; Meyer et al. 2014; Bass & Chakrabarty, 2014; Du et al., 2015; Shi et al., 2016; Hobdari et al. 2017). The conclusions drawn may be regarded as unilateral, ignoring the unique characteristics of government bodies from other emerging markets, and overall the findings tend to be generalized. Therefore, by studying two other EM SMNE cases and one Chinese case, I hope to extend this body of research with additional SMNE internationalization observations and conclusions.
3.2 Sample
In order to have productive comparative cases, the research objects have to fulfill specific requirements. I decided to choose SMNE from emerging markets. EM exhibit a delayed privatization and liberalization process with the result that they still have a relatively high collection of SOE. EM have the need to catch up and generate growth. These circumstances support the idea of having an economic agent that encourages these ambitions. Furthermore, I decided to focus on the BRIC because they are the closest in scale and scope to China, as well as the emerging markets in general and traditional understanding (Becker, 2014). However, even more important, I choose those countries based on their variation in institution with the focus on the political system in order to discover, how and if SMNE are affected by such national and institutional characteristics that results in a specific behavior. India as democracy since their independence, Brazil as country that has undergone various forms of sovereignty in the last eighty years, from autocracy to military dictatorship resulting in a young democracy and China as autocratic “market-socialism” one party state (Becker, 2014). I excluded Russia because the autocratic system exhibits various similarities to China and additionally the ongoing sanctions might distort and hamper the internationalization process of Russian SMNE due to the sanction targeting governmental associated organizations and persons (Fioretti, 2017).
Whilst it was generally not possible to find completely equivalent research objects in scale and scope, these three objects are still the most equal and suitable entities for the purpose of this case study. But overall all of the three SMNE are engaged in all three major business fields of the oil & gas sector: upstream-, midstream- and downstream activities. Upstream activities focus on the exploration and production (E&P) of oil that involves resource discovery and exploitation. Midstream activities focus on transport (i.e. pipelines) and storage of natural gas and crude oil. Downstream activities include refining, petrochemical plants, commercialization and retail. This area processes the raw material and distributes and commercializes the final products to consumers (Kang et al., 2017).
3.3 Data collection
In my qualitative research approach, a comparative case study, I collected solely secondary data due to the rich and in-depth available information concerning my research objects. Especially, with regard to my main research goal of investigating the interrelation between SMNE and the associated government in the context of internationalization, the sources provide much detailed information, due to the requirement that listed companies publish quarterly and annual reports in order to update investors. Moreover, companies voluntarily provide additional information in order to attract investors – thus extending the given information pool. Additionally, any government action is subject to strict, documented procedures and mostly requires policies, decrees and laws, which also must be published. Therefore, use of this data allows me to obtain an insight into the company’s behavior, and
Table 4. Company Overview
Petrobras S.A. / Petroleo Brasileiro SA China Petroleum & Chemical Corporation (Sinopec Corp.)
Indian Oil Corporation Limited (IOC)
Origin Brazil, Rio de Janeiro China, Beijing Inida, New Dehli
Founded 1953 2000 1959
Governmental share 50.26% 71.32% 58.28% Core field of activity Upstream, midstream, downstream Upstream & midstream Downstream & midstream
Amount of Shareholders 49 32 24
Listed Exchanges Madrid, Sao Paulo, Buenos Aires & New York Stock Exchange
Shanghai Stock Exchange,
Hong Kong, New York and London Bombay Stock Exchange
Fortune Global 500 (range) 58 4 161 Revenenue (in Million $) $97,314 $294,344 $54,711
Employees 68,829 451,611 32,803
Subsidiaries 297 186 38
Home country political system
Democratic Ferderal Presidental Republic Single-Party Autocracy Democratic Ferderal Parliamentary Republic
Political & economic stability Volatile Stable Stable
the corporate governance structures, based on concrete and official documents. Table 5 gives an overview about the used sources and the intention by doing so.
One drawback of the chosen approach is the occurring dependence of the given data, as I am not able to prove the information on absolute substance. However, I was able to cross-check
the information by using multiple sources. Furthermore, some published information by the
SMNE is mandatory but a) not all information, and b) the extent of mandatory information can be interpreted in many ways. In this context, the entities could hide or cover up important information. Moreover, I was unable to identify the actions of the SMNE and government interrelations behind the scene. Overall, the process of data collection was accompanied by a dependence on the published data, the publisher’s goodwill, and a lack of transparency. All generated information was systematically collected in tables, figures and documents to achieve a specific data collection and interconnecting model of the (single) cases in order to have a direct multi comparison.
3.4 Data analysis
The data analysis followed four systematic steps in order to codify the collected data in a logical format. The first step was to process the overall collected data in a systematic and appropriate way. The goal of the first data preparation was to generate a general overview of the single cases and cluster the information on a basic level.
The second step was to refine and complement the data sets within the case based on the first step. I processed and evaluated the data sets according to the five indicators: governmental intervention in business activities, time and location to start internationalization, choice of countries, choice of entry mode and speed of internationalization. The documentation and
Table 5. Used sources & objective
Source Type Content Research purpose
ORBIS Database Share- & stakeholder, subsidiaries information, network, license
Objective company data, SOE integration & relationship, (ownership structure)
Zephyr Database M&A, joint venture, IPA, buy-out information
Chronological patter, type of deals & ownership structure
Annual reports Official document Company & financial data Insight of SOE, market commitment, market knowledge, expectation, strategies, general data to complement data collection
SOE documents Shareholder law, protocols, company guidelines
Legal structure, corporate governance
How decisions-making are made;
power structure, establishment of governmental rights, dependence relations
Governmental documents
Official document, protocols, laws, policies, decrees
evaluation has the objective of sense-making within the case. In the following section I will explain why and how I clustered the data in relation to the indicator.
The third step was to place the evaluated data from the previous two steps in an institutional context. The goal was to show the full picture by including the environmental background. For example, it was necessary to examine the Chinese SMNE in the context of its political system and historical tradition, so as to gain a better understanding of the function and motives behind internationalization behavior. It also includes the analysis of events, not only based on empirical facts, but an explicit description of how and why they occurred and their interrelation from the past to the actual outcome.
For the last step, my objective was to discover similarities and differences across the three cases. By doing so, I identified the mechanisms that drive the process and behavior of internationalization and documented the individual motives and strategy. For example, if the SMNE is outward-orientated or internal-orientated, or if the international activities have the single objective of sourcing natural resources for the domestic market or if the perspective of global engagement is to scale business by entering new consumer-markets. Finally, I classified the results in relation to the indicator across the cases in order to have a direct comparison.
To summarize, in the first two-steps, I analyzed and processed the single cases to understand the firms’ nature, than put them into the institutional context. In the last step, I conducted a multi-comparison of the three cases in order to present the main differences, similarities, drivers and characteristics.
4. Case & Results
The second indicator, time and location to start internationalization, tracks the timing of the SMNE’s internationalization process, specifically when and where it begins. The goal here is to establish a possible logic or pattern, considering the time of the first internationalization, location, and age of the firm. According to Cuervo-Cazurra (2008) there are two basic theoretical models of where to start internationalization. The first theory follows an incremental model called the UPPSALA-model by Johanson and Vahlne (1977) (see section 2.1). This model follows the logic that companies first expand to countries with a close psychic distance and familiar environment in order to reduce uncertainty and risk. The second model follows more an opportunistic logic. Companies start to internationalize in countries that provide a beneficial environment and where they can exploit local advantages. The results give information about the general strategy and logic of internationalization. Moreover, it helps to understand where internationalization starts and provide data for the following indicator to support sense making and identify a pattern of internationalization. To be more precise it enables analysis of where and when the SOE started their internationalization, and how the company will proceed with the process. Moreover, the analysis should indicate information about when the SOE became a SMNE.
The third indicator, choice of country, builds upon the previous indicator, in that it looks at what kind of countries the SMNE entered over the period of time in order to identify an internationalization pattern. I followed the UPPSALA model by using geographic distance (GD) as proxy (Johanson & Vahlne, 1977) (see section 2.1). By doing so, I tracked the internationalization process chronologically, and in a second step I integrated the measure of geographic distance. GD is defined as the distance between the domestic capital and the foreign capital. Moreover, I allocated the entered countries into region or country groups in order to clarify a possible pattern. I decided to exclude the measure of cultural distance by Hofstede because, in my view, the measurement did not provide additional value. The data had not been accurate according to African-, Asian- and countries of the Middle East based on incompleteness of the Hofstede database. The outcome distorted the results. I also excluded countries that are entered purely because of the opportunity for evasion of tax, such as the Cayman Islands. The motive to engage with such countries is not related to expanding business or resources in the narrower sense, and their inclusion would have distorted the results.
The fourth indicator tracks the chosen mode of entry over time and in total volume. This technique allows conclusions to be drawn about the SMNE strategy, including their preferred
partnership and alliance, greenfield, joint venture and M&A. The listed order mirrors the degree of relational risk and integration from low to high. I also oriented on the incremental UPSALLA model by steadily increasing the market-commitment (Johansion & Vahlne, 1977) (see section 2.1). I also tracked the entry mode in relation to majority and minority share. Majority share is everything equal or higher than 50%. A minority share is everything less than 50%. The entry mode of partnership and alliance is always seen as majority share. Generally, the focus of this indicator was on global outward interaction. Moreover, it ought to be mentioned that the case of entry mode by acquisition primarily involves governmental licenses of exploration and production.
The final indicator looks at the speed of internationalization. This indicator provides information about the intensity of entering new countries over the time. The measurement orientates on the work of Johanson and Hilmersson (2016), who arranged the entered countries in proportion to the firm age. In order to achieve a set of comparable results in relation to the speed ratio, I also calculated the speed over the fixed time period of 2000 to 2017. Consequently, it is possible to reach conclusions, if a SMNE is following a moderate or aggressive internationalization process.
4.1 Governmental intervention in business activities Petrobras
Petrobras demonstrates strong connection with the government since its establishment in 1953 and has been present throughout many periods of political turmoil in Brazil, from autocracy to military dictatorship, eventually to the democratization of the country. The relation is characterized by high commitment. The relationship between Petrobras and the government has not been limited on formal interaction, but instead Brazilian politicians used the company in order to enrich themselves or to buy power and influence. In addition, Petroleo Brasileiro SA also bought out Brazilian Presidents like General Ernesto Geisel in 1974 or President Dilma Rousseff in 2011 (Leahy, 2016).
that point Petrobras faced international competition on the national market. Despite this, Petrobras remained ahead of the competition in Brazil. Moreover, the central government resolved its liability for Petrobras in a possible case of insolvency (Oliveira, 2011; Musacchio & Lazzarini, 2014). In the period of the 1990s and 2000s, Petrobras experienced a new period of self-determination but also faced new risks due to the reduction of governmental support. Additionally, the Brazilian government reduced its proactive role by govern Petrobras and adopted a new restrictive role. In this context the privatization of Petrobras increased market-orientation and commitment (Musacchio & Lazzarini, 2014). The SMNE learned to balance the interests of non-governmental and private shareholders that might have different perception of the firm’s direction. Beyond the extended self-determination the Law 6,404 of December 15, 1976, determines that the Brazilian government has to own at least 50% plus one share. The government is also able to appoint and remove directors, including the CEO, and the Minister of Energy has a direct seat on the Board.
With the legislation of the Labour Party under President Lula from 2003, the government has continuously amended its role in relation to Petrobras. In 2007, following the discovery of huge pre-salt oil reserves, the President used the rights of intervention to allocate Petrobras a strategic role with the responsibility of managing and exploring the deposit. President Lula saw Petrobras as economic tool to increase welfare for all Brazilian citizens (Beck, 2014; Economist, 2012). Under the Federal Law No. 12,351/2010, Petrobras is designated as the sole entity for all operations (Lemos et al., 2013). The main motive was to stabilize the economy and control national resources. In particular, rising rates of unemployment coupled with wealth inequality was progressively leading to unrest in the country. The pre-salt project was thus envisioned as a plan to stimulate the economy (Viscidi, 2015; Economist, 2012). Additionally, Petrobras was forced to sell oil below market price in order to encourage the domestic economy. However this resulted in major losses, and the government’s intervention almost led to the bankruptcy of the SMNE, not to mention the huge governmental financial burden in relation to the pre-salt exploration and development of infrastructure, which purported to further the economy. The governmental allocated role over challenged Petrobras capacity and resources and all over weakened Petrobras (Leahy, 2016). Beyond the direct reinvolvement of Petrobras as national oil and gas agent, the government supports the company with grant and further special contractual agreements for E&P activities (Petrobras Annual Report 2016, 2017).
Petrobras. Petrobras was unable to lift the necessary investment and was debt-ridden. Secondly, the government has had to reduce the role of Petrobras in order to attract FDI and help fight the effects of the recession (Marcello, 2016). Additionally, the Carcash corruption scandal forced the government to minimize its links with the SMNE as many high-profile politicians, such as the popular ex-President Lula, were engaged in the corruption allegations tied to Petrobras (Leahy, 2015).
The special relationship between Petrobras and the government could be described as dynamic and opportunistic. The government used Petrobras a tool for stabilizing and stimulating the economy where necessary, and thus it can be said that their association is volatile and highly influenced by macro-economic and political effects. However, following the scandal and the government’s decision to distance itself from the Petrobras, the company once again has the chance to extend its autonomy and become more politically independent. In general, the direction of Petrobras to internationalize seems to be initiated internally without the drive of the government.
Sinopec
The governance structure and intervention mechanisms for Chinese state-owned enterprises are well formulated and implemented by law. Chinese law gives shareholders far more rights than conventional Western legal bodies. The board is the judicative representative body and managing organ, but possesses less autonomic decision-making power. According to Chinese law, the shareholder general meeting is the real (executive) power organ. The meeting is able to decide about the company strategy, investment plans and fundamental corporate changes such as M&A division, dissolution and liquidations (Wang, 2014). Moreover, outward FDI requires the approval of the Ministry of Commerce in order to check if the investment in line with governmental international investment strategy. This policy influences SMNE decision-making by determining if the target investment is in line with governmental requirements (Cui & Jiang, 2012).
the personal decisions. To be a possible candidate, an affiliation to the CCP is required (Yi-Chong, 2012).
The actual Sinopec Corp. chairman and legal representative is the former Vice-Governor of Heilongliang Province, Wang Yupu. Additionally, he is also the chairman of the 100% state-owned parent China Petroleum Corp. (Sinopec Group), which controls Sinopec Corp. This personal decision consolidates two main characteristics; on the one hand the position as official representative of Sinopec Corp. and on the other hand the majority shareholder and loyal governmental representative. Additionally, the majority of the board are also members of the CCP. This arrangement underpins the direct centralized power and tight relation to the government based on loyal representatives (Sinopec Corp. Annual Report 2016, 2017; Sinopec Group Annual Report 2014, 2015).
The direction of Sinopec is also established in the national five-years plan. This plan shows the political and economic goals to be achieved over this time period, energy politics and advancement of the SMNE taking a key role. In this context, Sinopec could be seen as a tool of the executive in achieving their desired results. For the last ten years, the Chinese SMNE has had the mandate to secure and source raw material to ensure long-term growth and international influence. By doing so, Sinopec Corp. has spent much effort in fulfilling that mandate by intensifying its global sourcing efforts and increasing its presence, in order to obtain a larger of world trade and resource distribution.
The 13th five-year-plan for the period 2016-2020 introduced a new willingness to change policies according to SOE and global sourcing. The plan still demonstrates commitment to strengthen the SOE and enhance its capacity for innovation to accomplish national objectives more efficiently, but the plans now also aim at increasing self-determination, market-orientation and competitiveness. The government want to give the SOE more autonomy in relation to its production and business operations, and encourage privatization by enhancing shares public float. Additionally, the plan provides for Sinopec to improve the quality of the produced oil and gas by actively investing in R&D and refining technique. Furthermore, Sinopec should to continue with the policy of global exploration and exploitation of oil and gas deposits (13th Five-Year-Plan of PRC, 2016).
prices of services and products produced by the company (Sinopec Corp. Annual Report 2016, 2017). Generally, the government dictates the gas price. In 2015, the government forced Sinopec to cut prices to help boost the economy, with the consequence that Sinopec now has to sell gas at a loss (Jiaru, 2016).
Generally, Sinopec is governed and controlled dominantly by the Chinese central government, which pushes the SMNE to fulfill its global mandate. The government has an extensive intervention mechanism and utilizes this, and grants large subsidies with the objective of facilitating international engagement. By giving a strict mandate and business perspective, the government shapes the role of the SMNE as an outward-orientated foreign agent.
Indian Oil Corporation
IOC is under the administrative control of the Ministry of Petroleum and Natural Gas (MoPNG). Governmental and presidential directives and guidance are mandatory and are transmitted through administrative ministry (Mishra, 2014). The primary function of the so-called Central Public State-owned Enterprises (CPSE) is it to serve the community and bring wealth, providing infrastructure and macro-economical stability and growth (Mishra, 2014). Beyond the specific administrative control of the ministry, the government established the Department of Public Enterprises (DPE). The task of the department is it to formulate policies according to the CPSE. However, the guidelines are not directly mandatory for the CPSE due to the lack of enforcement, with the Government of India (GOI) or ministry being required to countersign such guidance for it to be obligatory (DPE, 2017).
The GOI began to promote internationalization activity of the SOE from 1997. The first policies were formulated under the Navratnas scheme. The scheme was explicitly for the CPSE, and had requirements, which had to be fulfilled by the CPSE to be applicable. The goal was to transform Indian’s CPSE into global giants by providing them with more autonomy. The content of the scheme focuses on the modernization of industrial facilities, but in particular promotes the establishment of foreign subsidiaries and engaging in joint ventures and strategic alliances to enhance technology. The real novelty of the policy, however, was that governmental approval was no longer required to implement JV and alliances – provided a specific firm-related net worth of participation was not exceeded. However, the government reduced its support by providing resources such as cheap credits in the implementation of these autonomous projects. IOC satisfied the requirements of the Navratnas scheme classification, and obtained a new degree of autonomy. Mergers and acquisitions were excluded by the GOI, and thus still needed government approval (Navratnas scheme, 1997). In 2009, the government introduced a new scheme “Maharatna” that extended again existing regulations and autonomy for CPSE and aimed to foster internationalization. The scheme enhanced the scope of JV activities by increasing the company bounded net worth ratio. A new feature was the integration of M&A decision-making autonomy, however the ministry cabinet still had to be informed of such activities, and a net worth ratio also limited the scope of the transaction. The overall goal of the policy was to promote further global integration in order to gain economic influence, know-how, technology and competiveness and give CPSE greater self-determination (Maharatna Scheme, 2010). Indian Oil Corp. has been stated as flagship of the Maharatna companies (IOC, 2017).
In 2011, the GOI decreed that there existed a need to acquire raw material assets abroad, in order to guarantee future manufacturing economic growth. To do so, the government granted further autonomy to the CPSE to conduct global M&A. Furthermore, the government provided funds to finance overseas investments (DPE Guidelines, DPE OM No. 16(4)/2010-GM , 2011).
The following description of the relationship between the IOC and the government is provided by the chairman: “The oil and gas sector, under the Ministry of Petroleum & Natural Gas, is deeply committed to making energy available, accessible and affordable …” (Ashok, 2016. p. 1). The statement underpins that the IOC should function as national energy supplier. This characterization is in line with company slogan “The Energy of India” (IOC Annual Report 2016, 2017). Moreover, IOC and MoFNG have an annual memorandum of understanding that provides sourcing quotes and guidelines that should be fulfilled (IOC, 2017). Furthermore, IOC receives governmental subsidies, grants and gifts in the form of rights and land in order to achieve mutually desired goals (IOC Annual Report 2016, 2017). Overall, the government does possess intervention mechanisms, it has given its SMNE greater and greater autonomy and has taken a more passive role in their relationship. The GOI encourages its CPSE to internationalize, but through providing incentives rather than pressure. In this context, it can still be said that the general scope of bureaucracy can hamper SMNE activities via the initiation of new operations and strategies.
4.2 Time and location to start internationalize
IOC took 15 years to start with their first internationalization, expanding to the close and direct neighbor Nepal in 1974. The second expansion took place in 1993 after 24 years to the psychic close state Malaysia in 1993.
In comparison, Sinopec seems to be the exception out of the three SMNE. The Chinese company expanded directly in its year of creation to Saudi Arabia, and then to Algeria two years later in 2002. The selection of high geographic and cultural distance countries Saudi Arabia as paragon of oil wealth and the rich oil state of Algeria, demonstrates the strategic ambitions of the young company.
4.3 Choice of countries
In their first phase of the internationalization process, Petrobras and IOC followed the incremental approach of the UPPSALA model. They began to expand in the familiar region and steadily went step-by-step global. Both needed around 45 years to turn into a global player, but Petrobras turned one decade before IOC into a MNE. In comparison, Sinopec followed an eclectic pattern by identifying world-wide opportunities and exploiting its competitive advantage. After two years the young firm turned into an MNE, and three years later had established itself as a global giant. However, all three SMNE have in common that they targeted Africa as an important global region and aimed to increase their presence. Additionally, they were all relatively late in targeting Western countries, starting from 2009 with the objective of upstream activities. Moreover, all three show the same behavior in relation to their European subsidiaries, which were primarily used as financial transit and service operators. They do not have the task to enter host country in order to treat local markets in the first place.
IOC entered into 18 countries. Two major patterns can be seen from their country selection. The first observed pattern is the regional expansion around the Indian Ocean between 1998 and 2006. In that period the SMNE entered into Malaysia, Sri Lanka, Mauritius and United Arab Emirates. The expansion to UAE also has the strategic objective to supply and serve bordering countries such as Oman, Bahrain and Yemen. In the second wave of internationalization, IOC targets the African mainland up from 2005. In doing so, the IOC steadily increase its step-by-step its operational radius.
Sinopec entered 32 countries. Two major expansion patterns can be observed from their internationalization process. Firstly, the focus on the Middle East that is characterized by high psychic distance. With Sinopec’s expansion to Saudi Arabia as first foreign target the SMNE underpinned and initiated its focus on the Arabic Gulf region. This emphasis can be further demonstrated by the company’s entering into seven other Arabic countries. The second identified pattern points on Sinopec’s main focus on Africa. The company entered into 11
Table 6. Chronological documentation of entered countries
Year Country Year Country Year Country
1953 Argentina 2000 Saudi Arabia 1974 Nepal
United Kingdom 2002 Algeria 1996 Germany
1972 Colombia Ecuador 1998 France
1979 Angola Kazakhstan Malaysia
1987 USA Indonesia 2000 USA
1995 Bolivia 2004 Myanmar 2001 Mauritius
1996 Peru Gabon 2002 Sri Lanka
Ecuador Sudan 2004 Russia
1998 Venezuela Ethiopia 2005 Libya
Cuba Yemen 2006 Gabon
2001 Netherlands Oman United Arab Emirates
2003 Mexico Egypt 2007 Yemen
2004 Uruguay 2005 Brazil 2008 Nigeria
China 2006 Colombia 2010 Japan
2005 Libya Russia Sweden
Tanzania 2008 Syria 2011 Netherlands
Paraguay 2009 Iraq 2012 Venezuela
Japan Libya 2013 Canada
2006 Singapore Cameroon
Turkey Algeria
2007 Portugal Gabon
Pakistan Cote d'Ivoire
India United Kingdom
Iran 2010 Canada
2009 Namibia Angola
Chile Argentina
2010 Australia 2011 Australia
New Zealand 2012 Nigeria
2011 Benin United Arab Emirates
2013 Gabon United States
Nigeria 2014 Trinidad and Tobago
2015 Sri Lanka
African states – making up a third of all entered countries by the SMNE. The expansion to Africa began in 2002 and the main period of expansion process took place between 2004 and 2009. In 2009 Sinopec entered in five African states. In the same year Sinopec started gently to target more and more Western countries, which are generally more skeptical towards Chinese outward FDI targeting their national markets. In general is Sinopec’s internationalization process can be characterized by high psychic distance and rapidly expansion.
4.4 Choice of entry mode
IOC and Petrobras followed an incremental approach in their choice of entry mode. They started with lower market commitment forms, such as subsidiaries, and over time chose riskier modes with greater commitment such as JV and M&A. The main difference between the two entities is that Petrobras gains greater confidence over the internationalization process, becoming more autonomous and increasing its commitment within and across countries. In contrast, IOC has to be pushed by the government to take new steps, and its incremental development is more observable across countries. Sinopec favored a more aggressive and riskier entry mode, using M&A as an opportunity-seeking strategy from the outset. The Chinese SMNE showed a very low degree of risk-averse behavior, whereas IOC showed an outstanding risk-averse behavior – reflected in their preferred choice of minority JV and overall transaction amount. Furthermore, IOC displayed half of the total transaction amount compared to the other SMNE, out of the three, it is Petrobras that shows a healthy and calculated level of risk awareness.
In its early stages of internationalization, Petrobras favored greenfield activities in order to start business, especially in South America. With the change of century, the Brazilian SMNE started to engage more and more with JV and M&A. What is striking to observe is that all M&A activity had been majority acquisitions. The dominant tendency to majority shares is
Table 7. Regional allocation of entered countries
Petrobras Sinopec IOC
Africa 7 11 3 Asia 7 2 3 Europe 3 1 4 Indian Ocean - 3 3 Middle East - 7 2 North America 1 2 2 Oceania 2 1 -South America 11 5 1 Total Countries 31 32 18
also observable in relation to JV. Petrobras engaged in 14 of 17 JV by holding a majority stake, demonstrating the control ambition of Petrobras. Moreover, JV had been the selected entry mode for countries where no previous experience existed, mainly African and Asian countries, resulting from uncertainty. Furthermore, it is notable that more than half of all M&A activity had been conducted in countries that had already been entered via modes with lower commitment, such as greenfield activities. In this context, the acquisitions complemented assets and shares. This phenomenon can be observed especially in South America. Another observation points on the issue of institutions. Petrobras entered into the Western countries UK, Australia and New Zealand directly by 100% acquisitions. This chosen mode is characterized by high commitment and risk. Conversely to Africa, South America or Asia, the strong and stable institutions of the Western countries reduce transaction uncertainty. Derived from the aforementioned behavior, the decision of Petrobras how to enter a market is dependent on the experience and institutional condition of the country.
The following patterns have been observed according to Sinopec choice of entry. Sinopec used entry modes with lower commitment such as partnership, greenfield and also JV as an intermediate step to build up relations, get foothold and reduce foreign institutional concerns with the long-term objective to get a future advantages in order to get access to resource. This behavior had been observed especially in Africa and Middle East. Moreover, Sinopec used minority JV to enter Western countries that have a restrictive position in relation to Chinese SMNE FDI. It is remarkable that three quarter of the observed cross-border interaction have been M&A, 15 have been majority- and 11 of the 15 100% acquisitions. This demonstrates the aggressive expansion strategy of the young firm, the low risk avoidance and the demand to control assets. Furthermore, the majority of the acquisitions conducted in countries that are open for Chinese FDI, show less restrictive behavior and additionally have weak institutions. IOC’s choice of entry mode shows three major patterns. The Indian SMNE primarily used greenfield activities to expand in the area of the Indian Ocean. The subsidiaries are tasked with the commerce of IOC products. The second pattern points on the dominating use of JV
Table 8. Choice of entry mode
Majority Minority Majority Minority Majority Minority
Partnership & Alliance 3 - 4 - 1
-Greenfield 11 - 5 - 5
-Joint Venture 14 3 2 3 3 8
Mergers & Acquisition 15 - 15 8 2 2
Total 46 37 21
as an internationalization tool. IOC started its internationalization based on shared equity similarity with the introduction of the Navratnas policies in 1997. The law allowed and pushed SOE to internationalize by JV in order to gain knowledge and technology, but capped SOE resource participation (see section 4.1). The policy explains IOC choice of minority stakes and focus on downstream JV based on limited resource contribution and the objective of gaining know-how, which did not require a majority share to be held. The third pattern targets the slow rise of conducting M&A from 2012, fifty years after IOC creation. The increase is moderated by the Maharatna policy that announced the need for and promotion of the exploitation of global natural resources by M&A. This policy explains IOC’s decision to begin with the acquisition of international upstream & downstream assets.
4.5 Speed of internationalization
The speed of internationalization shows the SMNE intensity of entered countries over a specific time. As shown in the Table 9, Sinopec has the highest internationalization intensity, with an overall speed of 1.9 countries per year. Petrobras follows with an overall speed of 0.5, and then IOC has the lowest value of 0.3 countries per year.
The speed ratio demonstrates the aggressive internationalization strategy of Sinopec directly from the beginning. On average Sinopec entered three countries more than Petrobras and fivefold that of IOC. The speed ratio for IOC and Petrobras increased to approximately 2.5-fold up from 2000. It is worth mentioning in this context that Petrobras and IOC are much older than Sinopec. The creation of the Indian and Brazilian SMNE occurred at a time when globalization was not as big an issue as it was around the 2000s. But Petrobras and IOC did increase the tempo of internationalization towards the end of the 90s. The data supports this development in reference to speed from 2000 to 2017. This shows the tendency of broader internationalization from 2000. Beyond the acculturation of general internationalization, Sinopec still shows the highest speed ratio and it can be demonstrated that IOC internationalized at a far slower rate that the other two SMNE.
Table 9. Speed of internationalization
Age Entered Countries Speed up 2000 Overall Speed
Petrobras 64 31 1.2 0.5
Sinopec 17 32 1.9 1.9
4.6 Comparison
In the preceding sections, the differences and similarities of the internationalization process and SMNE character have been identified and explained. As mentioned before, IOC and Petrobras follow a less risky incremental approach of international expansion. The approach emphasized with a step-by-step internationalization in familiar environments. The entry mode decision depends on the institutional environment and unique experience of the SMNE. In contrast, the young Chinese Sinopec started from the beginning with an aggressive, rapid and risk-taking internationalization process by entering in countries with a high psychic distance by M&A.
IOC is pushed to internationalize by governmental incentives and does not show real internal ambitions to internationalize. The Indian SMNE is highly inward-orientated in reflection to its business actions resulting in high core market-commitment. IOC does not only function as global access provider to global natural resources. Whereas Sinopec is outward-orientated by focusing on global sourcing that limits national market-commitment. The Chinese government dominantly pushes and commands its entity to expand foreign business. Petrobras embodied both perspectives of inward- and outward-orientation in two ways. On one hand, it follows a world-wide self-initiated internationalization process and, on the other hand, it functions as a home country stabilizer and stimulator directed by the government when necessary.
Further characteristics and observations are summarized and documented in Table 10. The table offers an overview of the cases’ similarities and differences observed in the prior
5. Discussion
I examined three emerging market SMNE in order to test whether the dominant SMNE literature that orientates on implications derived from Chinese SMNE is applicable to other EM SMNE. I focused on the internationalization process and the role of governmental intervention.
I illustrated that differences and similarities between the internationalization and governmental involvement exist. I stated that the home government influence the SMNE in all three cases, and possess intervention mechanisms to govern and control the SMNE (He et al., 2016). The governments of emerging markets support and encourage its entities to internationalize, a finding also shared by Shi et al. (2016), Rudy et al. (2016) and Buckley et al. (2007). However, EM MNE are also pushed or incentivized by national authorities to expand globally (Luo & Tung, 2007). Governments want to support the companies in achieving a competitive advantage, as this generates growth and wealth in their own national market. It is therefore in the vital interests of governments to foster internationalization of its
Table 10. Compared illustration of case results
Petrobras Sinopec Indian Oil Corporation
Internationalization process incremental approach aggressive approach incremental approach
Speed internationalization
process medium
(step-by-step with phases of boom & breaks)
fast & rapidly slow & careful Global expansion pattern 1. Core focus on South America
2. Intensify African expansion from 2005
1. Middle East 2. Core-focus Africa
1. Indian Ocean 2. Africa but on a low-level Preferred entry mode 1. First step greenfield, second step
complementary acquisition 2. Joint venture (Africa)
Majority acquisitions 1. Indian Ocean greenfield2. Minority joint venture
Degree of risk avoidance medium low high
Internationalization motive asset-, market- & resource-seeking resource-seeking asset-, market- & resource-seeking Governmental involvement &
leading style stimulate national economy (crisis)If it is necessary to stabilize & Significant political-driven Steadily reduction by foster autonomy Government &
internationalization Restrictive & hampers in times of crises
High autocratic internationalization push
Push based on incentives / inefficient bureaucracy &
regulation hampers
Degree of autonomy medium to low low medium
Political agent & governmental
privileges medium high medium to low
Governmental leadership style Governmental dominated
collaboration Top-down Push by incentives
Strategy /
Organizational orientation
Global sourcing but focus on core market South America & build
long-term relations
Global collector: word-wide aggressive sourcing by acquisitions
in order to fulfill political mandate (outward-perspective)
Inward-perspective: Gain know-how & resources in global interaction to strengthen &
associated national firms and MNE (Guillén et al., 2016). However, in relation to SOE governments are able to go a step further based on the direct ownership, they are able to decree that internationalization should occur; without the need to provide incentives (Peng et al., 2016).
limiting strategic decision-making. The effect is tightened by the autocratic, hierarchical and centralized political system that emphasizes top-down governance based on the strictly organized institutional body governed by the CCP (Wang, 2014; Yi-Chong, 2012). The Chinese SMNE can therefore be characterized largely as politically-driven, in both strategy and implementation. The SMNE are an important tool of the CCP, a fiscal and political instrument used to sharpen the country’s profile and forms an integral part of the Chinese system. The agent embodied the role as global giant collector and supplier of critical resources for the People Republic of China (Buckley et al., 2007; Wang, 2014; Yi-Chong, 2012). The governmental entity has the mandate to guarantee national supply. In line with Luo and Tung (2007), Chinese SMNE can be accurately portrayed as a commission specialist with an existence based on one mandate – it has a macro-economical role to strategically secure resources for the government as mentioned by Bass & Chakrabarty (2014). In this context, the SMNE is outward-orientated Chinese SMNE can be accurately portrayed as a commission specialist with an existence based on one mandate – it has a macro-economical role to strategically secure resources for the government that limits its B2C orientation (Luo & Tung, 2007).
