Competing or Complementing: AES Entry into the Chinese Power Generation Market

Lena Croft
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Lena Croft: Department of Business Studies, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, China

Asian Case Research Journal (ACRJ), 2003, vol. 07, issue 01, 89-114

Abstract: This case study used longitudinal data to test the applicability of a western theory to a socialist market economy. Traditional theories assert that on entering a foreign market, firms must possess some ownership-specific advantages (e.g. access to sources of finance and advanced technology) in order to compete with indigenous firms (Hymer, 1976; Dunning, 1985; Buckley and Casson, 1991). The theories were subjected to debate when applied to the entry of the AES Corporation (AES), a United States power generation firm, into the People's Republic of China where socialist economic system is in practice. The case method was used to collect information rich qualitative data so as to analyse the firm behaviour of AES in China when the firm was exposed to the context of different fundamental values and institutional orders. Secondary data was collected from archives. In-depth interviews were conducted to gather data for later analysis.The study concluded that access to finance was the major ownership advantage constituting the successful entry of AES into China. This advantage complemented the deficiencies of its Chinese partners. Yet, the complementary relationship may not extend to some quasi state-owned firms which are nurtured under the Chinese government policies to become the "National champion teams". With the emergence of the "National champion teams", AES would have to apply a new set of strategies to meet the challenge.

Date: 2003
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DOI: 10.1142/S021892750300032X

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