Transformation of Chinese Firms into Multinational Corporations

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Running head: INTERNATIONAL BUSINESS
International business
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1INTERNATIONAL BUSINESS
Executive summary:
The following paper aims to focus on the transformation of the different firms in the
developing nation towards the multinational corporations. The first part the main motives
behind the transformation of the Chinese firms to MNCs. The part after the motives behind
the transformation states how the Foreign Direct investment helps in transforming the
multinational enterprises of China. Both advantages and disadvantages of the transformation
of firms into MNCs are been discussed. Reasons behind applying linkage leverage model and
ownership location internalization model have been also further stated. Lastly, the role of
government behind stimulating the foreign direct investment in the developing countries has
been described.

2INTERNATIONAL BUSINESS
Table of Contents
Introduction:...............................................................................................................................3
Transformation of firm into multinational organization and its motives:..................................4
Factors that affect the company transformation:........................................................................4
Advantage, capabilities and barriers in case of company transformation:.................................6
Difference between the linkage leverage model and ownership location internalization model:
....................................................................................................................................................7
Importance of FDI in company transformation:........................................................................7
Role of government in stimulating FDI:....................................................................................8
Conclusion:................................................................................................................................9
Reference:................................................................................................................................11

3INTERNATIONAL BUSINESS
Introduction:
One of the important topics used for media interests and academic research which is quite
famous all throughout the world is the globalization of the business firms from the
developing economies. The increase in the flow of outward foreign direct investment (OFDI)
from developing nations like Singapore and Hong Kong and transition economies consisting
of Russia and China is not very surprising (Rugman, Nguyen and Wei 2016). Over the past
thirty years, the mainland China have witnessed a huge economic development along with
transformation which in turn allows many firms from the mainland China to accumulate
enough location specific and firm specific advantages before they go for venturing abroad. In
the recent years, China has joined the newly industrialized economies (NIEs) of Latin
America and Asia in order to produce many competitive transnational corporations (Cherry
2015). The high-profile international acquisitions of the modern age along with the takeover
bids by the Chinese companies have dramatically shifted the attention of media from
stating China as a “giant seeking vacuum cleaner” in the case of global inward foreign direct
investment (FDI) to making the country as a cash-rich predator on a global buying binge. The
firms of China which have listed in Fortune 500 have been the main players in the cross-
border mergers and acquisitions (M & As) of China which has been carried out since the year
2002 (Fan, Cui and Zhu 2016). Some of the examples include the takeover of the Addax
petroleum, which is a Swiss-Canadian Company, and the partial acquisitions of Repsol YPF
Brazil. Other examples include Sync rude Canada by Sinopee, acquisitions of twenty percent
stake of the South African Standard Bank by The Industrial and Commercial Bank of China
(ICBC) (Wang, Wang and Liang 2016). The takeover of Petro Kazakhstan by the China
National Petroleum Corporation (CNPC) is some of the important examples. Under this
scenario, the report ids aimed to analyse the motive, impact and factors that influenced the
cross-border multinational transformation of the firms.