Chinese firms entering Europe: Internationalization through acquisitions and strategic alliances

Purpose: The purpose of this study is to examine specific use of strategic alliances and acquisitions for Chinese firms to catch-up technologically and to enhance their internationalization competence. Design/methodology/approach: The paper offers a conceptual analysis of internationalization through either FDI or strategic alliances. This is a novel approach, as most of the extant literature tends to view internationalization solely through the prism of FDI. The empirical evidence presented in the paper is twofold. First, it analyses empirical data on strategic alliances and acquisitions retrieved from Thomson SDC database, a premium business directory. Second, it also approaches the topic qualitatively, by offering a case study of Chery Automobile Co. Ltd, a Chinese company that has relied heavily on strategic alliances in its internationalization strategy. Findings: First, the study finds statistical evidence of a rising trend of formation of outward strategic alliances by Chinese firms. Second, the authors demonstrate the specific benefit of strategic alliances for Chinese firms to technically catch up and enhance internationalization competence. It is found that strategic alliances give Chinese firms opportunities to learn from front-runners in terms of gaining technological capabilities, and there are advantages in tagging developing and advanced markets. The main findings suggest that the internationalization of Chinese firms is in a process in which they gradually integrate technology and marketing/logistics alliances. This approach allows for sufficient time to learn and absorb new skills and technology. Moreover, Chery's case indicates that a series of successful international strategic alliances could also generate tremendous bargaining power for Chinese firms when undertaking subsequent international activities. Originality/value: This paper contributes to the small but growing body of literature on the internationalization of Chinese companies, their technological catching-up activities. Unlike previous studies that mainly focus on state-owned Chinese firms' internationalisation through outward FDI (such as M&A), the paper particularly contributes to the exploration of strategic alliances' effectiveness for private and latecomer firms' internationalization. Empirically, the data analysis and case study reflects the benefits for Chinese firms to enter into strategic alliances with European firms in order to enter into European market and to acquire technological capabilities.

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