Will China’s Multinationals Succeed Globally or Regionally?

Basic theory suggests that multinational enterprises (MNEs) succeed when they develop knowledge-based capabilities, often called firm-specific advantages (FSAs). In China’s case its large MNEs have few such knowledge based FSAs. Instead, they are building scale economies based on China’s country-specific advantages (CSAs) in relatively cheap labor and natural resources. Thus, China’s MNEs will likely become knowledge seekers as they go abroad, not knowledge takers. Unlike Western MNEs who transfer knowledge and technology through their FSAs, China’s MNEs will lack such FSAs for some years to come. While China’s MNEs will have difficulty in sustaining their initial forays abroad, it is likely that they will expand intra-regionally rather than globally and in a similar manner to other large multinationals.