Experiential drivers of foreign direct investment by late-comer Asian firms: The Chinese evidence

a r t i c l e i n f o Keywords: Managerial cognition International experience Foreign direct investment Top management team Asian emerging economy Event history analysis Focusing on the cognitive process of managerial decision making, we argue that both organizational and personal international experiences contribute to managerial knowledge structure which in turn influences firms' foreign direct investment decisions. Given the decision task context of latecomer Asian firms, the two types of experiences can lead to decision outcomes that compete for limited decision making resources, and therefore their interaction effect is expected to be negative. Based on a sample of 164 Chinese electronic manufacturing firms over an eight-year period (2001–2008), we found substantial support for our hypotheses. While both organizational and personal international experiences increase the foreign direct investment propensity of a firm, these experiences also weaken each other's effects. Recent years see a phenomenal growth of foreign direct investment (FDI) by firms from Asian emerging economies (EEs) (Buckley et al., 2007; Jormanainen & Koveshnikov, 2012). Unlike their developed country counterparts, being " later-comers " (Bartlett & Ghoshal, 2000) to the global market, these Asian firms face dual competitive pressures for short-term survival and long-term sustainable growth (Rui & Yip, 2008; Yamakawa, Peng, & Deeds, 2008). The weak market institutions in these emerging economies also impose constraints on firms' strategic behaviors and their access to critical resources (Cui & Jiang, 2012; Peng, Wang, & Jiang, 2008). When making FDI decisions, these dual competitive pressures and institutional constraints result in increased decision task urgency and reduced decision making resources, which have consequences on firms' utilization of experiential knowledge. While such consequences can potentially explain the special characteristics in EE firms' internationalization that deviate from conventional theoretical prediction, they have, however, not been systemically studied in the literature. The existent literature highlights two perspectives of experiential drivers of FDI. An organizational perspective recognizes firm's prior foreign market experience as a key driver of firm's entry and increasing commitment in foreign markets (Johanson & Vahlne, 2009; Peng, 2001). An upper-echelon perspective focuses on the firm's managerial resources and experience that support its growth in international markets (Daily, Certo, & Dalton, 2000; Reuber & Fischer, 1997). The literature however lacks an integrative framework to examine the simultaneous and interactive effect of both types of experiential drivers. The existent literature are also mainly validated in a developed country context, which does not take into …