The recent announcement regarding the acquisition by ChemChina of the Swiss company Syngenta represents a well-planned acquisition strategy by a state-owned Chinese firm. The goal of this acquisition can be best understood as an achievement and orientation that relate to a Chinese enterprise national strategy to achieve global reach and, in the meantime, advance the country’s need for food security. China’s limited arable land and a population estimated at 1.2 billion suggest that such a strategy represents national aspiration as well as commercial business interests. In addition, ChemChina has moved to acquire industries related to tire manufacturing by acquiring the Italian brand name and tire maker Pirelli. ChemChina’s acquisition of Syngenta, valued at more than $43 billion is among the largest of Chinese foreign firms’ acquisitions in foreign markets. Chinese firms are looking abroad for a diversified portfolio of foreign investments from natural resources, such as copper, oil, rubber, and plastics among others. Beyond the issue of natural resource acquisitions from food to strategic commodities, other Chinese firms have purchased foreign firms in the areas of entertainment and other service-related industries, such as the American social network Grindr. Chinese firms’ acquisition strategies, while seen in the perspective of the literature on direct foreign investments from Hymer to Vernon, as well as Ajami and Ricks, about motives or entry strategies in the U.S. market should also be understood as a strategy to move to markets at a much faster pace than Organization for Economic Co-operation and Development (OECD)–based multinational corporation acquisition strategies.
The reasons for Chinese acquisitions abroad are multifaceted. First, acquiring U.S.-based enterprises, such as Smithfield in the food industry, as well as the acquisition of Syngenta, could be best understood within a push–pull conceptual framework of market-based global development. The United States is the largest global market, in terms of gross domestic product (GDP) when compared to other OECD markets in Europe. It is a consumer-driven GDP growth model, and the Chinese could benefit from learning to operate in such a market in order to apply the learned corporate experiences from the U.S. market to what many leading economists and policy makers believe they ought to be heading—away from the manufacturing-production–led growth of the last three decades, and to a consumer-centric notion of GDP growth.
Another reason Chinese firms are moving abroad is an attempt to acquire leading global brands. Moreover, these are strategic moves by Chinese international firms to overcome the lack of indigenous Chinese innovative commercial activities, technology, and talent. The growth rate of the Chinese economy is currently estimated to be between 5% and 7%. The numbers are suspicious, however, and may conceal far more relative weakness in the Chinese economy. Another set of reasons relates to the strong legal foundation of the American marketplace, which will protect foreign investors once these investors have overcome the scrutiny and concerns of the U.S. Congress and the Committee on Foreign Investment to acquire controlling interests in U.S. multinational firms. The Committee on Foreign Investments in the United States often subjects foreign multinationals to higher tests whenever they declare an interest in acquiring a U.S. company; however, once they are in, they are likely to be accorded an equal and fair treatment, as far as the legal landscape allows and permits. To be in the American market is a strong pull factor for Chinese firms considering uncertainty regarding the Chinese financial landscape within China. Moreover, financial uncertainties regarding the value of the yuan and the inevitable forthcoming of liberalization of Chinese financial markets have motivated many Chinese firms and Chinese entrepreneurs to want to move funds into foreign locations and foreign markets.
Over the span of a 20-year period, the Chinese have made strategic foreign acquisitions throughout the European OECD economies, the United States, and Israel, in a range of industries. The allure of the United States and, to a lesser degree, other OECD markets is powerful and offers certain advantages as well as challenges to Chinese firms. The Chinese government’s effort to allow for free movement of funds has yet to be clearly understood or established; however, with the slowdown in the Chinese economy, private enterprises and state-owned firms are likely to seek attractive destinations for their financial resources. The openness of OECD economies stands in contrast to a non-market-based, Chinese economic system that will make it tempting for Chinese enterprises to seek investments abroad. From health care to technology to innovative firms, the Chinese will be there eyeing OECD investments. Moreover, the desire to acquire real estate and natural resources will complement a portfolio of multinational investments for the growing number of Chinese multinationals that are beginning to be added to the list of the 500 most influential global international firms. The Chinese global acquisitions should be seen as a new form of Asian Rumba, two steps forward, one step back. Seen from that light the Chinese will be a new source of global direct foreign investments.
As you reflect on the past academic year and embark on summer research activities, we look forward to aiding in your scholarly pursuits. The articles in this issue come from a diverse group of authors. Although this word diverse is often overused these days, these selections truly live up to the definition as they are from authors as near as Bowling Green, Kentucky, USA, and as far away as Bangkok, Thailand.
Our first article, “Should Firms Look to an Insider or an Outsider When Hiring a New CEO? Evidence from China,” by Feng Liang of Western Kentucky University, demonstrates the effect of culture on management, hierarchy, and organizational change. The second, “High Performance Work System in India: Examining the Role of Employee Engagement,” by Ashutosh Muduli of Pandit Deendayal Petroleum University, Sunita Verma of Mody University of Science and Technology, and Saroj K. Datta of VIT University, all of India, explores the consequence of aligning a high-performance work system and employee engagement and finds this combination has a positive influence on productivity.
The third article, “Accelerating Adoption of New Products of Thai Consumers: The Moderating Roles of Self-Brand Concept and Reference Group,” is by Danupol Hoonsopon of Chulalongkorn University in Bangkok. Mr. Hoonsopon’s data analysis points to ways to use branding strategy to improve marketing of new products to possibly fickle consumers. This issue’s final article is “Investor Sentiment and Stock Market Volatility: Evidence from India,” by Jyoti Kumari and Jitendra Mahakud of the Indian Institute of Technology Kharagpur, India. While the previous article explores consumers’ resistance toward new products, Kumari and Mahakud explore the relationship between investors and a changeable stock market in India.
We wish you a most relaxing and productive summer break, which is not the oxymoron it appears on the surface. We appreciate your continued loyalty to the scholarly academic process that results in this journal. Thank you.