Chinese MNCs as Risk Avoiders in Cross-Border Acquisition: Host Country Choices by Chinese MNCs, 1992~2008

This paper examined the factors that may affect the location choice of Chinese MNCs when they expand abroad through cross-border acquisitions, focusing on effects of risk-reduction behaviors. Through the empirical analysis of cross-border acquisitions by Chinese MNCs, 1992~2008, we have found that the location choice of Chinese MNCs are affected positively by the focal firm’s previous experience in the host country and negatively by the cultural distance between the host country and China. Both findings suggest that unlike the conventional image of Chinese MNCS as aggressive risk takers, they attempt to reduce the risk of cross-border acquisition. We also found that the Go Global policy by Chinese government reduces the positive effect of the Chinese MNC’s previous experience in host countries, suggesting that the relative importance of firm-level knowledge decreases as the government introduces a risk-reducing mechanism at the field level.