Do Chinese Private-Owned Enterprises Really Go to the Foreign Market?: An Agency-Theory Approach
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In 2006-2010, China manifested ‘Go Overseas’ Policy. While state-owned enterprises followed the initiative, the motivation of private-owned enterprises (POEs) has not been clear. While foreign market entries surely provided a good opportunity for the POE growth, the opportunity was highly risky. Adopting agency theory, we posit that family firms managed by the professional manager would behave in a risk-averse manner towards foreign expansion. On the other hand, family firms managed by the owner’s family would enter the foreign market because owners can make risky decisions. We also examine the moderating effects that government supports would deter the resource commitment of private business, and thus the link to the overseas expansion will be weakened while competitiveness in the market would strengthen the link. We construct a dataset that consists of 1,216 firms listed in China during 2009-2016. A fixed-effect probit analysis suggests that greater family ownership discourages the internationalization decision, while greater family management encourages it. Government support strengthens the discouragement, while competitive positioning strengthens the encouragement. Overall, our research has found that it is family-managed firms, not family-owned firms, that have executed foreign market entries, which confirms presence of the principal-agent dilemma in the overseas expansion of Chinese POEs.
Abstract
In 2006-2010, China manifested ‘Go Overseas’ Policy. While state-owned enterprises followed the initiative, the motivation of private-owned enterprises (POEs) has not been clear. While foreign market entries surely provided a good opportunity for the POE growth, the opportunity was highly risky. Adopting agency theory, we posit that family firms managed by the professional manager would behave in a risk-averse manner towards foreign expansion. On the other hand, family firms managed by the owner’s family would enter the foreign market because owners can make risky decisions. We also examine the moderating effects that government supports would deter the resource commitment of private business, and thus the link to the overseas expansion will be weakened while competitiveness in the market would strengthen the link. We construct a dataset that consists of 1,216 firms listed in China during 2009-2016. A fixed-effect probit analysis suggests that greater family ownership discourages the internationalization decision, while greater family management encourages it. Government support strengthens the discouragement, while competitive positioning strengthens the encouragement. Overall, our research has found that it is family-managed firms, not family-owned firms, that have executed foreign market entries, which confirms presence of the principal-agent dilemma in the overseas expansion of Chinese POEs.
참고문헌 (40)
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