Capability Building of Developing Country MNEs: the Chinese Experience

In this paper, we take Chinese MNEs (CMNEs) as examples to demonstrate how CMNEs are able to upgrade capability through a dynamic process of transforming CSAs and foreign connection to FSAs. As the three cases show, at the beginning of this process CMNEs were nurtured at their home market in strong CSAs while developing and possessing weak FSAs in technology and management skills. Before internationalising, CMNEs benefited from inward internationalisation which provided opportunities for them to connect and learn from advanced country MNEs. When starting to internationalise, CMNEs, especially large and state owned, benefited from international trade and aided projects, other government supports and various CSAs, during which they were able to improve FSAs. Once operating in the global market, they obtain and upgrade FSAs by learning through practice and forming partnerships. In internationally open bidding projects, they have to learn how to meet the demand of host country, to pass the scrutiny of their supervisors - often advanced country MNEs, and to build a reputation so as to win more contracts. CMNEs were eventually able to compete in the international market with strengthened FSAs. These findings enable us to set up a simplified framework to demonstrate the evolutionary process of the capability building of CMNEs.