Political hazards and entry modes of Chinese investments in Africa

Lu, J, Li, W, Wu, A and Huang, X 2018, 'Political hazards and entry modes of Chinese investments in Africa', Asia Pacific Journal of Management, vol. 35, no. 1, pp. 39-61.


Document type: Journal Article
Collection: Journal Articles

Title Political hazards and entry modes of Chinese investments in Africa
Author(s) Lu, J
Li, W
Wu, A
Huang, X
Year 2018
Journal name Asia Pacific Journal of Management
Volume number 35
Issue number 1
Start page 39
End page 61
Total pages 23
Publisher Springer
Abstract Africa has achieved the fastest growth rate of inward foreign direct investment (FDI) recently. Yet heightened political hazards present substantial challenges to foreign firms in Africa. This study examines the entry strategies that firms may take to mitigate such hazards by exploring the relationship between political hazards and entry mode choices in Africa. We further consider how an investing firm's host country experience and foreign aid provided by its home country government to host countries in Africa can influence this relationship. In a sample of listed Chinese firms' investments in Africa from 2000 to 2014, we find that Chinese firms tend to use the joint venture mode when political hazards are high in an African country. This relationship is weakened when they accumulate host country experience and when the Chinese government's foreign aid to an African country increases. Our findings point to firm-level strategies to mitigate political hazards as well as instruments available to home country governments to help their multinational firms operating in host countries characterized by unstable political environments.
Subject International Business
Keyword(s) Africa
China
Entry mode
Foreign aid
Foreign direct investment
Political hazards
DOI - identifier 10.1007/s10490-017-9514-3
Copyright notice © Springer Science+Business Media New York 2017
ISSN 0217-4561
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