Chinese FDI in Italy first draft

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Chinese FDI in Italyfirst draft

• Roberta Rabellotti and Marco Sanfilippo
• Phd Candidate in Politics and Economics of
  Developing Countries
• Department of Economics, University of Florence
• marco.sanfilippo_at_unifi.it

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Research Outline

• Review of the theoretical literature on emerging
  multinationals
• Analysis of Chinese MNEs competitive advantages
  and motivations of Chinese FDI
• Evidence from European countries setting Italy
  in the European perspective
• Mapping Chinese FDI in Italy
• Preliminary considerations based on secondary
  evidence
• Research on the field (to be done)

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Chinese FDI in Europe- country level evidence
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Chinese FDI in Europe- Firm level evidence
(greenfield)
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UK, Germany France

• UK
• Finance and manufacturing (electronics, textiles,
  automotive)
• Sales Mkt and Headquarters (telecomm.)
• MA Automotive (Rover) Chemicals Renewable
  energy
• Germany
• Manufacturing and trade companies
• Sales marketing
• MA TCL-Schneider electronics, recent interests
  in automotive and machineries (Invest in Germany)
• France
• Chinese FDI as rising source of employment (IFA,
  2007)
• Electronics (Hisense), chemicals, finance (Exim
  Bank)
• MAs TCL- Thomson TCL- Alcatel
  BlueStar-Rhodia/Adisseo

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Chinese FDI in Italy (AT Kerney, 2008)

• A first phase, starting from the 1960s of
  flagship investments such as the establishment
  of the commercial office of Air China in Rome in
  1986
• A second phase, from the mid 1980s to the 1990s,
  characterized by episodic investments, among
  which in 1986 the Chinese Nanjing Automotive
  Corporation opening a representative office in
  Turin and in 1988 the Cemate Group which opened a
  commercial office to start selling Chinese
  machineries in Italy
• A third phase, which started at the end of the
  1990s and it is characterized by the entry in
  Italy of Chinese global players (such as Haier,
  COSCO, Baosteel) as well as by an increasing
  number of acquisition operations.

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Mapping Chinese FDI in Italy- the dataset

• 56 Chinese FDI in Italy (incl. 3 ceased)
• ICE-Reprint database
• Previous studies AT Kerney, 2008 Bellabona and
  Spigarelli, 2007 Spigarelli, 2008
• MOFCOM Italy
• Specialized press.

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Evolution in the quality of Chinese FDI in
Italy
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..as well as in the modalities of entry
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Sectoral and geographical distribution
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The logistic sector from defensive to offensive
market-seeking investments

• COSCO and China Ocean Shipping Company (HQ) in
  Naples and Genoa
• Initially, joint-ventures and strategic alliances
  with local enterprises and setting up of
  commercial offices (defensive investments)
• Recently, acquisition of European companies and
  investment in new infrastructural projects
  (offensive investments) aimed at the
  acquisition of market shares and more valuable
  positions in global logistic chain

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The home appliances sector market and
asset-seeking investments

• The home appliances sector is a mature industry,
  characterized by a producer-driven global value
  chain
• Chinese firms have built their production
  capabilities working initially as subcontractors
  for developed country MNEs
• Then, they have been able to develop their own
  products and brands, initially sold in the
  domestic market
• This has allowed to the domestic firms to acquire
  some competitive advantages on the basis of whose
  they have begun their internationalization
  strategies.

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Haiers European HQ in Varese

• Acquisition of strategic assets at the level of
  the firm technology, human capital, distribution
  networks
• Agglomeration advantages
• Specialized labor market
• Specialized suppliers of components and parts
• Specialised knowledge on markets and technologies.

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The pure strategic asset-seeking investments

• Automotive companies in Turin (Anhui and
  Changan) RD and design centers
• Acquisition of technology and brand
  Quianjiang-Benelli (motorcycle producer)
• Brands Hembly-Sergio Tacchini (sportswear),
  Xinyu Hengdel Group-Omas (luxory goods).

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Preliminary considerations

• Evidence is still scarce, only few key operations
• Pattern of entry in Italy similar to other main
  European countries
• However, Italy holds some distinctive comparative
  advantages e.g. economies of agglomeration in
  traditional sectors..
• ..but also some distinctive disadvantages in
  attracting FDI high bureaucracy and restrictive
  policy on visa concession

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Preliminary considerations

• Italys manufacturing model built largely on
  SMEs has proven vulnerable to Chinese
  competition
• Chinese FDI, in perspective, may provide some
  benefits to domestic economic system
• Focus on strategic competitive advantages
• Fresh capital
• Sale networks
• Access to rapidly increasing global Asian market.

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Research on the field

• Nonetheless, more first-hand information is
  needed to answer basic questions as
• At the country level Does the pattern of Chinese
  investment in Italy differ from other European
  destinations, if so why? Does the pattern of
  Chinese investment differ from other investors to
  Italy, if so why?
• At the local level How do Chinese investors
  enter into local linkages? What is the impact
  (threat or opportunity) of the Chinese presence
  on the local cluster?
• At the firm level Are Chinese subsidiaries in
  Italy building up competences? How dothey
  transfer within the company these competences
  acquired locally?