China goes global: public policies' influence on small- and medium-sized enterprises' international expansion

Abstract

Despite small- and medium-sized enterprises' (SMEs) significant contribution to China's social and economic development, very little has been written about the influence that public policies (i.e. public funding priorities and regulatory measures) may have on the first stage of international expansion of Chinese SMEs. To help fill this gap, the article analyses five main factors related to public policies and services affecting Chinese SMEs' internationalization: access to public financial resources; participation of the government in ownership; access to public procurement contracts; adverse regulatory and inconsistent legal frameworks; and public assistance on information and knowledge about markets. The main conclusion is that SMEs appear to base their international expansion on private capabilities, rather than on support from the government; in addition, the perceived barriers for the international expansion of these firms may be mainly internal, rather than institutional.

Keywords::

• China
• emerging markets
• government intervention
• international expansion
• SMEs
• public policy

Acknowledgements

The authors would like to thank the support and help received during the data collection stage, in particular from Dr Yu Guocai (Nankai University) and from Mr Jikai Ma (Ningxia Foreign Experts Bureau) and his team. The authors would also like to thank the very constructive feedback from three anonymous reviewers and the very good editorial guidance from the editors.

Notes

^1. Email: [email protected]

^2. Email: [email protected]

^3. Email: [email protected]

^4. Email: [email protected]

^5. SMEs account for 60% of China's GDP, 66% of the country's patent applications, 80% of its new products, 68% of China's exports, and provide more than 80% of total employment [“China's Struggling Smaller Firms. Small Fish in a Big Pond” (The Economist, September 10, 2009)]. In fact, there are more than 10 million Chinese SMEs that account for 99% of the total enterprises and also for 50% of tax revenue (People's Daily Online 2010).

^6. Iinstitutional environment defined as ‘the set of fundamental political, social and legal ground rules that establishes the basis for production, exchange and distribution’ following Davis and North (1971, 6).

^7. Many SMEs have no access to formal financing, face credit constraints, have to rely on self-financing (Shen et al. 2009; Zhu, Wittmann, and Peng 2011) and are subject to local government controls (Huang and Di 2007).

^8. White proposed to analyse the R² of a regression equation that includes the squared residuals from a regression model with the cross-product of the regressors and squared regressors.

^9. Except in some variables of Equation (3), although it was deemed not necessary to make changes to the Public Procurement Contracts model (H3) due to the relatively high VIF as the effectiveness of the usual curing problems associated with multicollinearity is not clear and especially because relatively high VIF values do not by themselves undermine the results of the regression analysis (O'brien 2007).

Additional information

Notes on contributors

Guillermo Cardoza

Guillermo Cardoza is a professor of Innovation and Competitiveness at INCAE Business School (Costa Rica). Previously he held a Full Professorship on Management of Innovation and Competitiveness in Emerging Economies at IE Business School (where he founded and directed the Euro-Latin America Center) and a Research Fellowship at the Kennedy School of Government at Harvard University. He has been Executive Director of the Latin America Academy of Sciences and has worked as an engineer for 3M Corporation.

Gaston Fornes

Gaston Fornes holds a joint senior lecturer position between the Centre for East Asian Studies, University of Bristol (UK) and ESIC Business and Marketing School (Spain); in the latter he is the China Centre Director. His most recent book is The China-Latin America Axis. Emerging markets and the future of globalisation, Palgrave 2012. He is recipient of the Liupan Mountain Friendship Award from the Ningxia (China) Government.

Ping Li

Ping Li is a distinguished professor and dean of School of Business, Shandong University of Technology (China). He has published more than 100 papers on Innovation, FDI Spillovers and Chinese ExchangeRate management. He is currently Deputy Secretary-General of the China Society of World Economics, and Vice President of Shandong Management Association.

Ning Xu

Ning Xu is a lecturer and director of the EMBA Education Center in Nanjing University (China). He has published several papers on Chinese Industry Development and Internationalization.

Song Xu

Xu Song is a professor in the School of International Business and Economics, Anhui University of Finance and Economics (China). He has published more than 70 papers on international trade theories and policies. His most recent book is Research on Intra-Industry Trade.