Cross-Cultural Cooperation and Innovation: An Exploration of Chinese Foreign Direct Investment in Europe

Authors: Yongsheng Guo, Shuchao Li

Abstract:

This study explores Chinese Foreign Direct Investment (FDI) in Europe and the cross-cultural cooperation between Chinese and European managers. The aim of this research is to shed light on the phenomenon of investments in developed countries from an emerging market and to gain insights into the cooperation process. A grounded theory approach is adopted, and 46 semi-structured interviews were conducted with 10 case companies in Germany and 13 case companies in the UK. Grounded theory models are developed from primary data and interview quotes are used to support the themes. The interviewees perceived differences between the two parties in cultural traits, management concepts, knowledge structure and resource endowment between the two parties. Chinese and European partners can take advantage of different resources and cooperate in innovative ways to improve corporate performance. Moreover, both parties appreciate different ethical and cultural characteristics and complement each other to develop a combined organizational culture. This study proposes an ethical and cultural diversity theory in international management arguing that a team with diversified values and behaviours may be more excited and motivated. This study suggests that “resource complement” and “cross-cultural cooperation” might be an advantage for international investment. Firms are encouraged to open their minds and cooperate with partners with different resources and cultures. The authorities may review the FDI policies to reduce social and political barriers.

Keywords: Cross-culture, FDI, China, Europe.

References:

[1] Commission, E., Investment from China to the EU and EU to China: Recent developments and perceptions. European External Action Service, 2020.
[2] Sousa, C. & Bradley, F., Cultural Distance and Psychic Distance: Two Peas in a Pod?”. Journal of International Marketing, 2006(14(1), 49-70).
[3] Gholami, R., & Drogendijk, R, Cultural intelligence and performance of international joint ventures: The mediating role of partner communication. Journal of World Business, 2016(51(3), 451-464).
[4] Rong, K., Lin, Z., & Xiao, S, The impact of cultural distance on international knowledge spillover: Evidence from the One Belt One Road Initiative. Journal of International Business Studies, 2019(50(6), 881-900).
[5] Li, Y., Li, S., & Li, G, The impact of cultural distance on Chinese firms’ innovation performance in Europe: The mediating role of absorptive capacity. Journal of Business Research, 2019(103, 447-457).
[6] Xu, D., & Shenkar, O, National culture, cultural distance, and cross-border acquisitions: Evidence from China’s outward acquisitions. Journal of International Business Studies, 2019(50(1), 88-114).
[7] Zhang, Y., & Ding, S, Cultural distance, cross-border M&A, and target firms’ performance: Evidence from China. International Business Review, 2018(27(2), 544-557).
[8] Luo, Y. and R.L. Tung, A general theory of springboard MNEs. Journal of International Business Studies, 2018. 49: p. 129-152.
[9] Chen, X., & Chen, X., When does culture matter? The role of cultural similarity in cross-border mergers and acquisitions. Journal of International Business Studies, 2018(49(8), 963-989.).
[10] Li, Y., Li, S., & Li, G, The impact of cultural similarity on the performance of Chinese FDI in Europe: The moderating role of marketing capability and competitive advantage. Journal of Business Research, 2020(115, 358-366).
[11] Ding, X., & Zhang, H, Cultural intelligence and organizational innovation in multinational corporations: The moderating role of global mindset. International Business Review. 2016(25(4), 943-954).
[12] Wang, D., Li, J., & Li, Y, Knowledge acquisition from alliance partners and innovation: The role of cultural distance and intermediary learning. Journal of Business Research, 2017(76, 24-31).
[13] Shen, X., Wei, Y., & Zhang, Y, Cultural intelligence, strategic agility and firm performance in an emerging market context. International Business Review, 2018(27(4), 842-854).
[14] Li, Y., Li, S., & Li, G, Cross-cultural communication and negotiation effectiveness in international business: A conceptual framework and research propositions. Journal of International Business Studies, 2018(49(7), 923-936).
[15] Wang, Y., Li, Y., & Li, G, Bridging local adaptation and global integration: Chinese firms in Europe. Journal of Business Research, 2019(103, 499-510).
[16] Drogendijk, R., & Slangen, A, Bridging the gap: Cross-cultural cooperation in Chinese FDI. Thunderbird International Business Review, 2017(59(3), 365-378).
[17] Liu, L., & Xiong, W., The role of intercultural communication competence in cross-cultural communication during Chinese firms’ outward FDI in Germany. Asia Pacific Journal of Management, 2018(35(4), 1005-1029).
[18] Baker, H.K., Chakrabarti, A.K., & Wang, Y., Chinese Foreign Direct Investment in Europe: Characteristics, Motivations, and Implications for European Economies. Journal of Contemporary Accounting & Economics, 2018. 14(3): p. 321-335.
[19] Cuervo-Cazurra, A., Narula, R., & Un, C. A, Internationalization and innovation of firms from emerging economies. Global Strategy Journal. 2020(10(1), 3-32).
[20] Gao, T., Guo, Y., & Zhang, Y, Chinese FDI and innovation performance: Evidence from European countries. Technovation, 2019(80, 40-51).
[21] Cui, L., & Jiang, F, The heterogeneity of China’s outward direct investment and its implications for China–EU relations. Journal of Contemporary China, 2018(27(111), 565-579).
[22] Service, R.W., Book Review: Corbin, J., & Strauss, A. (2008). Basics of Qualitative Research: Techniques and Procedures for Developing Grounded Theory. Thousand Oaks, CA: Sage. Organizational Research Methods, 2009. 12(3): p. 614-617.
[23] Charmaz, K., Constructing grounded theory: A practical guide through qualitative analysis. 2006: sage.
[24] Earley, P.C. and S. Ang, Cultural intelligence: Individual interactions across cultures. 2003.
[25] Evans, J.S.B., Dual-processing accounts of reasoning, judgment, and social cognition. Annu. Rev. Psychol., 2008. 59: p. 255-278.
[26] Fiske, S.T., et al., A model of (often mixed) stereotype content: competence and warmth respectively follow from perceived status and competition. Journal of personality and social psychology, 2002. 82(6): p. 878.
[27] Kratz, A., Zenglein, M., Sebastian, G. and Witzke, M, Chinese FDI in Europe: 2022 Update, Rhodium Group, May 9, 2023.