What Determines the Establishment of Chinese Multinational Enterprises’ Asian Regional Headquarters?

Abstract

ABSTRACTThis study addresses why multinational enterprises (MNEs) in emerging economies establish regional headquarters outside their home countries but within their home regions – an important question that previous studies have largely ignored. We extend Rugman and Verbeke's firm-specific assets (FSAs) framework in contemporary internalization theory and differentiate two firm-specific regional strategies (i.e., foreign direct investment (FDI) and export regionalization) to examine their effects on MNEs’ establishment of regional headquarters in the context of emerging economies. Using survey data from 226 Chinese MNEs, we find that intraregional FDI and interregional exports encourage MNEs to build Asian regional headquarters (ARHQ). Furthermore, we find that home-city regional integration moderates the relationship between interregional exports and ARHQ establishment and that MNEs’ international management capability moderates the relationship between intraregional FDI and ARHQ establishment. This study contributes to the regional strategy literature by clarifying the regional strategies, structures, and management of latecomer Chinese MNEs.