China’s OFDI support mechanisms in Germany: how governments can work together to promote SME internationalization, reduce liability of foreignness and contribute positively to society

Abstract

PurposeNested within institutional theory and the political economy perspective, this study aims to examine Chinese outward foreign direct investments (OFDI)-supporting organizations and fostering mechanisms for its SMEs in Europe’s largest economy, Germany.Design/methodology/approachThe authors conduct a multiple-case study to present rich insights from elite interviews with representatives of Chinese and German governmental organizations, intermediary parties and specialized OFDI consultants. In addition, the authors analyze secondary data such as presentations, websites, brochures, social media and recent Chinese OFDI policies for SMEs. The findings are triangulated by interviewing business owners and senior executives of seven Chinese SMEs that have invested in Germany.FindingsCooperating with Germany’s federal government, China’s ministries implemented an effective OFDI support network in Germany, which connects and benefits both economies. This includes Chinese governmental organizations, privately-held national champions, German–Chinese business associations and linked intermediary parties. These organizations support SMEs through four main mechanisms: networking and information, mutually beneficial knowledge transfer between innovation partners, lobbying for potential cooperation and an objective picture of Chinese OFDI and facilitating investment services.Originality/valueThis study advances OFDI theory and contributes to the growing discussion on the internationalization of Chinese SMEs by shedding light on China’s OFDI support organizations and mechanisms in the German market. The study also offers practical contributions. Understanding better how governments can spur internationalization is vital, as it determines the effectiveness of policymaking and fosters international mutual understanding, cultural exchange and firm growth and innovation (Ahlstrom, 2010), and hence ultimately contributes positively to society. Moreover, knowing the specific OFDI support organizations and measures China is currently adopting can serve as a helpful orientation for Chinese entrepreneurs who plan to invest in Germany.