Accessing the Impact of FDI Goals on Risk Management Strategy and Management Performance in the Digital Era: A Case Study of SMEs in China

Hengbin Yin, Muhammad Mohsin (), Luyao Zhang, Chong Qian and Yan Cai
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Hengbin Yin: School of Finance and Trade, Wenzhou Business College, Wenzhou 325035, China
Muhammad Mohsin: School of Digital Commerce, Zhejiang Yuexiu University of Foreign Languages, Shaoxing 312000, China
Luyao Zhang: School of Business, Hanyang University, Seoul 04763, Korea
Chong Qian: School of Finance and Trade, Wenzhou Business College, Wenzhou 325035, China
Yan Cai: School of Finance and Trade, Wenzhou Business College, Wenzhou 325035, China

Sustainability, 2022, vol. 14, issue 22, 1-20

Abstract: COVID-19 has impeded the internationalization of enterprises and sustainable digital economic growth. This situation has led to enterprises adopting divestment strategies to deal with multiple risks. However, the successful implementation of strategies depends on understanding the perceptible risks. Due to risk management failures or unexpected risks, strategic management has attributed withdrawal to production costs or marketing, but risk management has never addressed it. Moreover, small enterprises are more vulnerable to risks than large ones. For the first time, this study fills a gap in the literature by combining Dunning’s investment motives theory with the COSO risk management process theory to examine small enterprise risk perception in China. China has seen a growing number of foreign direct investment (FDI) withdraw. Different risks should have been faced and managed if these were determined to be efficiency-seekers or market-seekers. This research context led to a survey of 498 FDIs, including market-seeking or efficiency-seeking types, to identify perceived risk, managed risk, and value risk outcomes. The Statistical Package for the Social Sciences (SPSS) 18.0 program was used for frequency analysis of general characteristics and exploration of factor analysis, whereas, Analysis of Moment Structures (AMOS) 18.0 was used to perform a confirmatory factor analysis and develop a structural equation model. The obtained results indicate that market efficiency-oriented enterprises can modify their strategies by implementing digital transformation and localization strategies. In contrast, production efficiency-oriented enterprises will divest because of risks, without finding a better strategy.

Keywords: FDI; risk management strategy; investment motives; digital transformation; divestment (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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