The People's Republic of China has become a major source country for foreign direct investment. The objectives of this research are to identify the determinants of this phenomenon, to identify the international investment strategies pursued by Chinese MNEs, and to evaluate the effect of the domestic and international institutional environments on the determinants, investment strategies and behaviour of Chinese MNEs. Particular emphasis is given to the role of cross-border business and social networks. To address these objectives a novel framework, termed the Chinese outward direct investment regime (or ODIR), is advanced and tested using methodological triangulation techniques. This is done using data obtained from several sources, namely interviews with managers at the headquarters of Chinese MNEs and Chinese government officials, a survey questionnaire distributed to Chinese affiliates in the UK and official FDI data obtained from SAFE and MOFCOM, which are used in two econometric models of global Chinese ODI. The research makes a number of major contributions. First, the ODIR framework is found to have significant explanatory power in a number of key respects, especially in relation to the influence of domestic institutional factors on the internationalisation behaviour of Chinese MNEs. Second, the importance of domestic capital market imperfections as a driver of Chinese ODI is also confirmed. Capital market imperfections as a special application of the internalisation theory (Buckley and Casson, 1976) is argued to explain certain idiosyncratic investment behaviours observed among Chinese firms, especially in relation to host country risk. Third, a number of new proxies for international business research have been developed and applied successfully in models. Fourth, New Institutional Theory, the Stages Theory and the New International Venture theory have all been tested for the first time in relation to Chinese ODI. Of these, New Institutional Theory was found to have greatest explanatory power.

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The debate concerning whether foreign investment in developing nations benefits or exploits workers is a highly emotive and unresolved debate. This dissertation contributes to literature that explores the impact of foreign direct investment (FDI) on a host economy, more specifically on the experiences workers employed within foreign-invested enterprises in a developing nation. Amongst developing nations, China has absorbed the lion's share of FDI throughout the 2000s and is therefore a sensible location to study the effects of FDI on a developing nation host economy. Given the variety in levels of economic development across China, we avoid errors of generalisation by targeting a specific location. Shandong is one of the most important – and understudied – provinces in China, contributing significantly to China's economy and being the destination for an increasing share of China's FDI; within Shandong, Qingdao is the most popular destination for FDI. Existing literature that explores the effects of FDI on host nation employees either takes a quantitative, macro-economic level approach, such as International Business literature, or uses qualitative methodology to give anecdotal evidence of worker experiences, such as in the globalisation and labour studies bodies of literature. We combine both these approaches to investigate the experiences of FIE employees in Qingdao. The key research findings are: a domination of South Korean, wholly foreign-owned enterprises targeting the relatively more labour-intensive manufacturing sectors from 1996 to 2006 in Qingdao, having implications in terms of FIE employment opportunities and human capital accumulation; a sharp decline in the size of the FIE workforce from 2007 to 2009, highlighting the potential problems a developing nation may face if it has a large concentration of 'flexible' foreign investments; and reports of a wide range of experiences of FIE employees engaged in more white-collar roles, including positive development opportunities and negative experiences of discrimination.

China’s outward foreign direct investment (OFDI) grew from a very limited scale prior to the 1990s to reach an annual average growth rate of 67% between 1991 and 2009, placing China as the largest FDI source country among the developing countries, and the fifth largest FDI source country in the world in 2009. China’s experience is particularly interesting because it serves to help us further understand OFDI in general and the emergence of investments from the developing countries in particular. This thesis aims to answer a series of unexplored questions about China’s OFDI, including its underlying motivations and locational determinants, the dynamic adjustment of China’s OFDI and its relationship with China’s inward foreign direct investment (IFDI), as well as the displacement effect of China’s OFDI on the OECD’s OFDI in the host countries. The first essay of this thesis (Chapter 3) investigates the underlying motivations and the locational determinants of China’s OFDI flow in detail, and focuses on the role played by the host country’s natural resources and technology. The chapter constructs two datasets, the first one encompasses 157 host countries for the recent period 2003-2009 and the second one includes 171 host countries for the early period 1991-2003. An FDI gravity equation is estimated by using alternative specifications, including Tobit, fixed effects and the Heckman selection model. In the recent period of 2003-2009, the findings provide strong evidence of the natural resources-seeking motivation and the technology-exploiting motivation in Chinese OFDI. In particular, China’s OFDI is driven to resources abundant countries with poor governance. The chapter also argues that China’s OFDI is promoted when the oil price is growing. In the early period of 1991-2003, however, there is only some evidence that China’s OFDI is driven to resources abundant countries with poor governance, and no evidence that the host country’s technology plays a role in Chinese OFDI. The second essay (Chapter 4) introduces a partial stock adjustment model and provides the first study on the dynamic adjustment of China’s OFDI in a dynamic framework. The effect of China’s IFDI on China’s OFDI within this dynamic framework is also studied. 172 host countries are included for 2003-2009 by using the System GMM, OLS and fixed effects models under an augmented gravity specification. The chapter provides strong evidence to support the dynamic adjustment of China’s OFDI. The equilibrium OFDI stock is greater and more volatile than the actual OFDI stock, implying that the underinvestment in China’s OFDI and the possible existence of the substantial adjustment costs associated. The findings suggest that the host country, on average, exploits its potential in attracting China’s future investments. There is some evidence of the positive correlation between China’s IFDI and China’s OFDI. In particular, the dynamic adjustment of China’s OFDI is stronger for the high-technology host countries, and the positive association between IFDI and OFDI is higher for the high-income host countries. The third essay (Chapter 5) is the first piece of research to examine whether and how China’s OFDI displaces the OECD’s OFDI in the given host countries. The chapter examines 33 of the OECD countries’ OFDI flow into 155 host countries for 2003-2009. Most importantly of all, the chapter also explores how the OECD countries’ OFDI are affected by China’s OFDI in these host countries. TSLS and fixed effects estimations are undertaken under an augmented gravity specification. The chapter presents evidence that China’s OFDI displaces the OECD’s OFDI in general. However, in contrast to the often-cited arguments concerning a ‘new colonialism’ in Chinese OFDI, no evidence was found that the OECD’s OFDI in oil and metal abundant host countries, in particular Africa and Latin America, are displaced by China’s OFDI.

How does a firm choose a proper model of foreign direct investment (FDI) for entering a foreign market? Which mode of entry performs better? What are the performance implications of joint venture (JV) ownership structure? These important questions face a multinational enterprise (MNE) that decides to enter a foreign market. However, few studies have been conducted on such issues, and no consistent or conclusive findings are generated, especially with respect to China. It’s composed of five chapters, providing corresponding answers to the questions given above. Specifically, Chapter One is an overall introductory chapter. Chapter Two is about the choice of entry mode of FDI in China. Chapter Three examines the relationship between four main entry modes and performance. Chapter Four explores the performance implications of JV ownership structure. Chapter Five is an overall concluding chapter. These empirical studies are based on the most recent and richest data that has never been explored in previous studies. It contains information on 11,765 foreign-invested enterprises in China in seven manufacturing industries in 2000, 10,757 in 1999, and 10,666 in 1998. The four FDI entry modes examined include wholly-owned enterprises (WOEs), equity joint ventures (EJVs), contractual joint ventures (CJVs), and joint stock companies (JSCs). In Chapter Two, a multinominal logit model is established, and techniques of multiple linear regression analysis are employed in Chapter Three and Four. It was found that MNEs, under the conditions of a good investment environment, large capital commitment and small cultural distance, prefer the WOE strategy. If these conditions are not met, the EJV mode would be of greater use. The relative propensity to pursue the CJV mode increases with a good investment environment, small capital commitment, and small cultural distance. JSCs are not favoured by MNEs when the investment environment improves and when affiliates are located in the coastal areas. MNEs have been found to have a greater preference for an EJV as a mode of entry into the Chinese market in all industries. It is also found that in terms of return on assets (ROA) and asset turnover, WOEs perform the best, followed by EJVs, CJVs, and JSCs. Finally, minority-owned EJVs or JSCs are found to outperform their majority-owned counterparts in terms of ROA and asset turnover.

This thesis includes four empirical studies related to foreign direct investment (FDI), governance, economic growth and the environment. We firstly investigate the existence of the so called pollution haven hypothesis (PHH) in China, i.e. the impact of regional environmental regulations (ER) on FDI inflows. We then examine the other determinants of FDI: regional government effort to tackle corruption and government efficiency. It then extends the methodology of the first two studies and revisits the PHH issues by treating ER as endogenous. Finally, we observe the effects of economic growth and foreign direct investment on the environmental quality across Chinese cities. After addressing the weaknesses in previous literature, our findings provide the following results. First, an intra-country pollution haven effect does exist in China. Such an effect is also found when ER is treated as endogenous but not robust for the sensitivity checks using different instrumental variables and estimators. Second, FDI is attracted to regions that have made more effort on fighting against corruption and that have more efficient government. Third, government variables do not have a significant impact on ER. Fourth, economic growth has a negative effect on environmental quality at current income levels in China. Finally, foreign investment has positive effects on water pollutants and a neutral effect on air pollutants. Such effects vary across pollutants and investment from different sources.