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Asia Pacific Journal of Management

, Volume 35, Issue 1, pp 39–61 | Cite as

Political hazards and entry modes of Chinese investments in Africa

  • Jane Wenzhen Lu
  • Wen Li
  • Aiqi Wu
  • Xueli Huang
Article

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 

Notes

Acknowledgements

We very much appreciate insightful comments and helpful guidance from Mike Peng in the review process. This study is supported by research grants (National Natural Science Foundation of China: 71402097, 71272165, 71572174, 71372054). All views expressed are those of the authors and not of the sponsoring organizations.

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Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  • Jane Wenzhen Lu
    • 1
  • Wen Li
    • 2
  • Aiqi Wu
    • 2
  • Xueli Huang
    • 3
  1. 1.The University of MelbourneMelbourneAustralia
  2. 2.School of ManagementZhejiang UniversityHangzhouChina
  3. 3.College of BusinessRMIT UniversityMelbourneAustralia

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