FDI, ownership change and the firms’ business performance in China

Zhu, Zhaohui (2014) FDI, ownership change and the firms’ business performance in China. Doctoral thesis (PhD), Manchester Metropolitan University.

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Abstract

The thesis focuses on the firms’ business performance in China, along with the growth of Foreign Direct Investment (FDI) inflows and the reforms of the institutions. This research employs New Institutional Economics (NIEs) as a theoretical basis, seeking to identify the mechanism of interaction between FDI, ownership change, and the institutions in China. The economic reforms, which started in the 1980s and continued thereafter, not only led to an unprecedented level of FDI inflow into China and increased the role of the private sector and ownership in the country, but also had more serious implications in that the formal and informal institutions of the Chinese economy remains largely under the control of the Chinese Communist Party. This study considers ownership change as an appropriate connection between FDI inflows, the improvement of business performance, and the institutions in the context of both formal and informal institutions in China. This paper aims to provide supporting evidence for the institutional approaches to the study of business performance in a transition environment. The author chooses the World Business Environment Survey (WBES) as the data source to explore the relations between the institutions and the business performances of enterprises in China, measured by sales and investment. In this thesis, the author uses a number of statistical tools, including descriptive analysis, Levene’s test, Error Bar, Logistic regression, and categorical regression. The results show that the influences of the institutional constraints reported by the hypotheses vary in different occasions according to the firms studied, and these significant relations between the institutions and the business performance cannot be kept consistent and continuous. The influences of institutions on the business performance are complicated in China, measured by sales and investment. The complexity consists of the relation and interaction among the formal and informal institutional factors, of the relations between the institutional factors and the firms’ inherent nature, and of the relations between the institutional factors and the firms’ business performance in China.