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Journal of International Business Studies

, Volume 49, Issue 6, pp 659–683 | Cite as

Diplomatic and corporate networks: Bridges to foreign locations

  • Jing Li
  • Klaus E Meyer
  • Hua Zhang
  • Yuan Ding
Article

Abstract

Firms and governments operate in broad networks in which the home government and its diplomatic service are a critical node – or a “referral point” – between firms and potential partners in foreign locations. Thus diplomatic relations between countries matter for the choice of foreign investment location. Using a network perspective, we argue that the extent to which good diplomatic relations induce firms to invest in friendly host countries depends on their political connections to home governments. Those with stronger ties to home governments can better access and leverage intergovernmental diplomatic connections, thus benefiting potentially from enhanced access to information, reduced political risks, and increased legitimacy. Such ability of politically connected firms is more useful where weak institutional impartiality in the host country inhibits neutral treatment of foreign investors. Empirically, using overseas investment location decisions by Chinese firms, we find that the types of home government ties (i.e., whether they are organizational or personal and whether those relationships are with central or local goverments) and the impartiality of host institutions are both important contingencies affecting firms’ utilization of diplomatic relations. We discuss the implications of our study to research on network theory, political ties, and internationalization of emerging market firms.

Keywords

diplomatic relations network theory political ties state-controlled firms foreign location choice Chinese multinationals 

Résumé

Entreprises et gouvernements fonctionnent en larges réseaux dans lesquels le gouvernement d’origine et son service diplomatique sont un nœud critique — ou un « point de référence » — entre les entreprises et les partenaires potentiels à l’étranger. Ainsi, les relations diplomatiques entre les pays influencent le choix de la localisation de l’investissement étranger. Recourant à une perspective réticulaire, nous argumentons que la mesure dans laquelle de bonnes relations diplomatiques poussent les entreprises à investir dans des pays d’accueil amicaux dépend de leurs relations politiques avec les gouvernements des pays d’origine. Ceux qui ont des liens plus forts avec les gouvernements des pays d’origine peuvent mieux accéder et utiliser les connexions diplomatiques intergouvernementales ; bénéficiant ainsi potentiellement d’un meilleur accès à l’information, de risques politiques réduits et d’une légitimité plus forte. Cette aptitude des entreprises connectées politiquement est plus utile lorsque la faible impartialité institutionnelle du pays hôte inhibe le traitement neutre des investisseurs étrangers. Empiriquement, à l’aide de décisions de localisation des investissements étrangers par des entreprises chinoises, nous constatons que les types de liens du gouvernement d’origine (qu’ils soient organisationnels ou personnels, et qu’ils soient au niveau des administrations centrales ou locales) et l’impartialité des institutions hôtes sont tous les deux des contingences importantes qui affectent l’utilisation des relations diplomatiques par les entreprises. Nous discutons les implications de notre étude pour la recherche sur la théorie des réseaux, sur les liens politiques et sur l’internationalisation des entreprises des économies émergentes.

Resumen

Las empresas y los gobiernos operan en amplias redes en las cuales el gobierno local y su servicio diplomático es un nodo crítico –o un “punto de referencia”- entre las empresas y los socios potenciales en lugares extranjeros. Por ende, las relaciones diplomáticas entre países son importantes para la elección de la ubicación de inversión extranjera. Usando una perspectiva de redes, sostenemos que el grado en que las buenas relaciones diplomáticas inducen a las empresas para invertir en países anfitriones amistosos depende de las conexiones políticas de los gobiernos locales. Aquellos con lazos más fuertes con los gobiernos locales pueden tener mejor acceso y aprovechar las conexiones diplomáticas intergubernamentales, beneficiándose potencialmente de un mejor acceso a información, disminución de riesgos políticos y aumentar la legitimidad. Esta capacidad de las empresas políticamente conectadas es más útil cuando la débil imparcialidad institucional en el país anfitrión inhibe el tratamiento neutral a los inversionistas extranjeros. Empíricamente, usando decisiones de ubicación de inversión extranjera de empresas chinas, encontramos que los tipos de lazos con el gobierno local (ya sean organizacionales o personales, y ya sean con el gobierno central o local) y la imparcialidad de las instituciones anfitrionas son ambas importantes contingencias que afectan la utilización de las empresas de las relaciones diplomáticas. Discutimos las implicaciones de nuestro estudio a la investigación sobre la teoría de red, los lazos políticos, y la internacionalización de las empresas de mercados emergentes.

Resumo

Empresas e governos operam em amplas redes em que o governo anfitrião e seu serviço diplomático são um nó crítico - ou um “ponto de referência” - entre empresas e parceiros potenciais em locais estrangeiros. Dessa forma, relações diplomáticas entre países são importantes para a escolha do local do investimento estrangeiro. Usando uma perspectiva de rede, argumentamos que a magnitude que boas relações diplomáticas induzem as empresas a investir em países anfitriões amigáveis depende de suas conexões políticas com os governos domésticos. Aquelas com vínculos mais fortes com os governos domésticos podem melhor acessar e alavancar conexões diplomáticas intergovernamentais, portanto potencialmente beneficiando-se de maior acesso à informação, de redução de riscos políticos e de maior legitimidade. Essa capacidade de empresas politicamente conectadas é mais útil quando a fraca imparcialidade institucional no país anfitrião inibe o tratamento imparcial de investidores estrangeiros. Empiricamente, usando as decisões de localização de investimento no exterior de empresas chinesas, achamos que os tipos de vínculos governamentais do país (sejam eles organizacionais ou pessoais, sejam eles com governos centrais ou locais) e a imparcialidade das instituições de acolhimento são contingências importantes que afetam a utilização das relações diplomáticas por parte das empresas. Discutimos as implicações do nosso estudo para a pesquisa sobre a teoria das redes, vínculos políticos e a internacionalização das empresas de mercados emergentes.

概要

公司和政府在广阔的网络中运营,其中本国政府及其外交服务是公司和在外国地点的潜在合作伙伴之间的关键节点或“引荐点”。因此,国家之间的外交关系对外国投资地点的选择是重要的。使用网络视角,我们认为,良好的外交关系引导公司投资友好东道国的程度取决于它们与本国政府的政治联系。那些与本国政府有着更密切联系的公司可以更好地获得和利用政府间的外交关系,从而潜在地得益于增加的信息获取,减少的政治风险和增加的合法性。有政治关系公司的这种能力在脆弱的东道国制度公正性抑制对外国投资者的中立待遇的情况下更为有用。实证上,采用中国公司海外投资定位决策,我们发现,本国政府关系的类型(无论是组织上的还是个人的,无论是中央的还是地方政府的)和东道国制度公正性都是影响企业利用外交关系的重要的偶发事件。我们讨论我们的研究对网络理论,政治关系以及新兴市场公司国际化研究的启示。

Notes

Acknowledgements

We thank JIBS Editors Alain Verbeke and Shige Makino and four anonymous reviewers for their insightful comments and suggestions. We also appreciate the helpful comments on earlier versions of this work from seminar participants at Shanghai University of Finance and Economics, Melbourne Business School, Singapore Management University, the University of Bath, Academy of Management Annual Meeting (2015), and the International Association of Chinese Management Research Biennial Meeting (2016). Financial support is gratefully appreciated by Jing Li from the Social Sciences and Humanities Research Council of Canada and the Canada Research Chair programs and by Klaus Meyer and Yuan Ding from the CEIBS Research Center on Globalization of Chinese Firms.

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Copyright information

© Academy of International Business 2017

Authors and Affiliations

  1. 1.Beedie School of BusinessSimon Fraser UniversityBurnabyCanada
  2. 2.China–Europe International Business School (CEIBS)ShanghaiChina

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