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Research summary: Departing from the extant literature, which assumes that firms pursue strong environmental performance as a differentiation strategy, we analyze the general relationship between firms' competitive strategy and their response to heightened market competition. We find that, using a large sample of Chinese manufacturing firms between 2000 and 2005, intensified market competition has an overall negative impact on firms' environmental performance. The negative impact is exacerbated in firms adopting a cost-leadership strategy, but is attenuated in those adopting a differentiation strategy. The results emphasize the importance of including an examination of the particular competitive strategies chosen by firms in seeking to understand the impact of intensified market competition. Managerial summary: Advocates of corporate social responsibility (CSR) have long argued for the differentiation role of CSR. However, managers may be misguided if the assumed benefits of differentiation critically depend on certain presumptions. In the Chinese context and focusing on the environmental dimension of CSR, our study finds a negative relationship between market competition and corporate environmental performance. It suggests that firms, to a large extent, cannot escape competition via environmental differentiation. Managers should therefore be cautious about the value of strategic investment in CSR as a viable competitive device.

Expropriation risk has a binding effect on foreign direct investment (FDI). However, state-owned multinational corporations may counter the monopoly power of the host state by leveraging the political influence of their home government. The magnitude of this counter force, we argue, may vary, depending on the strength of political relations between the home and host state, and the level of economic dependence of the host country on the home market. We find supporting evidence of our hypotheses using Chinese firm-level FDI information between 2003 and 2010.

Innovation adoption pattern has been found to be influenced by the underlying social network structure and its constituent entities. In this paper, we model innovation diffusion considering (1) the role of network structures in dictating the spread of adoption and (2) how individual’s characteristic/capability influences the path of diffusion ( e.g. an individual may have different attitude or ability towards adopting a new innovation). We consider that each individual is unique and his/her position in the network is important. We draw on the epidemic theory and model the diffusion dynamics via a continuous-time Markov chain which offers strong analytical tractability while retaining a high-level of generality. Our model allows derivation of individual’s adoption probability and the aggregate adoption behavior of the network as a whole. Precise computation of individual adoption decision conditioned by the population’s behavior is of exponential complexity (i.e., the state space exponentially increases with the size of the network). By applying a mean field approximation, the analysis complexity of the spreading mechanics is reduced from exponential ( O ( 5 N ) ) to polynomial ( O ( N )) and thus allowing our approach to scale for large networks. We offer insights into how the network spectrum affects the innovation exposure rate and spreading of innovation individually and across communities with different adoption behaviors. We compare our model against a wide-range of Monte-Carlo experiments and show close agreements in different settings (including both homogeneous and heterogeneous population cases). Finally, we illustrate the effects of the embedded social structure and the characteristics of individuals in the network on the path of innovation diffusion via two use cases: (i) innovation adoption of EU countries in a Single Market Programme and (ii) innovation adoption of specific class of technology (specifically financial technologies (FinTech)).

The upsurge of Chinese and Indian outward foreign direct investment (FDI) raises an unanswered question about locational determinants of direct investment from the two countries. Using an unbalanced bilateral FDI database, we find that Chinese and Indian FDI are attracted to countries with large market size, low GDP growth, high volumes of imports from China or India, and low corporate tax rates. We also find important differences between China and India. While Chinese FDI is drawn to countries with open economic regimes, depreciated host currencies, better institutional environments, and English speaking status, none of these factors are important for Indian FDI. Chinese FDI is also deterred by geographic distance and OCED membership. However, neither of these has any impact on Indian FDI.

Building on the growing debate on political determinants of foreign direct investment, we investigate the relationship between U.S. political influence and the global distribution of China's outward foreign direct investment (OFDI). Using country-level and firm-level datasets of China's greenfield investment, we find strong evidence that Chinese state controlled firms strategically reduce investment in host countries under significant political influence of the United States. Our results are robust to alternative specification and two falsification tests. The findings suggest that the Chinese government uses FDI as a way of economic diplomacy.

This research investigates the vertical knowledge transfer from Multinational Enterprises (MNEs) to their indigenous Chinese suppliers. By adopting a qualitative processual methodology, data from interview-based case studies is used to examine how the vertical supply relationship develops over time and the evolution of the knowledge transfer embedded within it. The research yielded the following research findings: An evolutionary pathway for the relationship development with three interconnected sequential stages are identified, in which MNE customers’ evolving expectations and evaluations, and the supplier firms’ response and commitment, jointly move the relationship up through each of the sequential phases. Japanese MNEs are found to have different attitude and approach in transfer knowledge to their indigenous supplier firms from Non-Japanese MNEs. The difference is significant in the initiating stage of the relationship and decreases over time. The transfer of knowledge in the relationships evolves from explicit knowledge to tacit knowledge and from technological knowledge to managerial knowledge. Generally, most supplier firms learn more managerial and operational techniques than products technology from their MNE customers. SOEs and POEs demonstrate different knowledge levels (KL) and knowledge efficiencies (KE) due to their differing abilities to attract financial support, different organizational incentive structures and correspondingly divergent endogenous development paths. Empirical contributions lie in that it is one of the first systematic investigations on MNE’s vertical knowledge spillover in China. Practical implications for both firms and policymakers are also generated built upon the empirical findings. The research also advances our understanding about some important theoretical issues of transaction cost economics.

In this paper we show, theoretically and empirically, that stronger employment protection legislation (EPL) in a host country has important and differing effects on the various activities of multinational enterprises (MNEs). Using micro data on affiliates to Swedish multinational firms in 20 countries for the period of 1965-1998, we find that increased stringency in EPL is associated with fewer investments in new affiliates and lower employment in existing affiliates. We also find that it is mainly affiliate exports that are affected negatively by stronger EPL, while the impact on local sales is small. This is in accordance with our theoretical model, which predicts that the impact of EPL on the costs of competing firms is likely to put affiliates at a smaller disadvantage when selling for the local market than in the production for exports.