Chinese MNEs and managerial knowledge transfer in Africa: the case of the construction sector in Ghana

Abstract

This paper considers the case of managerial knowledge spillovers from Chinese FDI in Africa, in the context of the Ghanaian construction sector. Using empirical data from in-depth qualitative interviews, the paper first identifies key channels and determinants of managerial knowledge spillovers. Limited local employment at the managerial level in Chinese construction firms is the main impediment to managerial knowledge spillovers from these firms. Cultural and linguistic barriers can explain this situation. Localisation strategies, defined as the progressive replacement of Chinese managers by local ones, can help overcome these barriers and foster managerial knowledge spillovers.

Keywords:

• foreign direct investment
• knowledge spillovers
• management
• China
• Africa

JEL classifications:

• O14
• O19
• O33

Acknowledgements

The authors are grateful to conference participants at UNU-WIDER conference on ‘Learning to Compete’, OCAN annual conference on ‘China and Africa’ and workshop participants at ODID and TMCD of Oxford University for helpful and constructive comments. Xiaolan Fu is grateful to the ESRC and DFID for financial supports (grant number RES-000-22-2791). Cyrielle Auffray is grateful to St Cross College and ODID for their financial support.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. TNCs are also referred to as multinational corporations (MNCs) or multinational enterprises (MNEs).

2. In Chinese 走出去 (Zǒuchūqū). Also referred to as the ‘Go Global’ policy.

3. Caution is recommended with FDI statistics. Pietrobelli et al. (2010, 3) noted that the MOFCOM FDI statistics ‘underestimate the real value of investments because they do not include the financial sector and are based on the value arising from approval procedures rather than the effective value of bids ... In addition, these data do not account for most M&A activity ... Notwithstanding these limitations, MOFCOM data represent the most up-to-date source of information on Chinese FDI, disaggregated by destination country and sector’.

4. This assumption has been tested successfully at the firm (Girma 2005) and country levels (Falvey, Foster, and Greenaway 2007), with absorptive capacity measured in terms of R&D investments (rather than human capital).

5. These numbers might fluctuate frequently, as employment varies widely depending on ongoing projects and their respective advancement stages. It should also be noted that the construction sector employs significant numbers of casual workers which may not be reflected in those numbers, as they do not usually have formal contracts or engagements with the company that employs them. Though these workers may also be able to assimilate some managerial knowledge from foreign companies, these spillovers are bound to be limited by their position in the managerial hierarchy, their low level of education and skills and the fleeting nature of their engagement with the company – therefore, the choice was made to limit the focus of the study to formal employees of construction MNEs.

Additional information

Funding

This work was supported by Economic and Social Research Council [grant number RES-000-22-2791].