Political hazards and entry modes of Chinese investments in Africa

Jane Wenzhen Lu (), Wen Li (), Aiqi Wu () and Xueli Huang ()
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Jane Wenzhen Lu: The University of Melbourne
Wen Li: Zhejiang University
Aiqi Wu: Zhejiang University
Xueli Huang: RMIT University

Asia Pacific Journal of Management, 2018, vol. 35, issue 1, No 3, 39-61

Abstract: 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.

Keywords: Political hazards; Foreign aid; Entry mode; Foreign direct investment; Africa; China (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (22)

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DOI: 10.1007/s10490-017-9514-3

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