Entry Mode Selection for Internationalization of Giant Chinese State Owned Companies: the Case of Entrance in Africa of China Communications Construction Company YANG Yongsheng Thesis submitted as partial requirement for the conferral of Doctor of Management Specialization in Organization and Human Resource Supervisors Prof. Nelson António (ISCTE Business School) Prof. JING Runtian (School of Management and Economics, University of Electronic Science and Technology of China) January 2012 - Spine – tion of Giant Chinese State Owned Companies: ChineseGiant of State tion China Communications Construction Company Construction Communications China YANG Yongsheng the Case of the Entrance in Africa of Africa ofCase the in Entrance the Entry Mode Selection for the Internationaliza the for Selection Mode Entry Entry Mode Selection for Internationalization of Giant Chinese State Owned Companies: the Case of Entrance in Africa of China Communications Construction Company YANG Yongsheng Thesis submitted as partial requirement for the conferral of Doctor of Management Specialization in Organization and Human Resource Supervisors Prof. Nelson António (ISCTE Business School) Prof. JING Runtian (School of Management and Economics, University of Electronic Science and Technology of China) January 2012 Abstract Enterprise internationalization is an inevitable choice as open economies develop to a certain level. According to the direct investment development path theory of John Dunning, when the GNP Per Capita exceeds $ 3000, the net foreign investment will be positive. With rapid development over the past three decades, China’s international economic position and influence have significantly improved and its GNP Per Capita has surpassed $ 4000, it has entered the rapid growth stage for investment development as described in Dunning’s theory. At this stage, the market entry mode selection is the first issue to tackle for enterprise internationalization. This thesis takes China’s giant state owned construction companies as research object and the author analyzes the internal and external environments and the strategic selection for internationalization operation, and describes the conceptions, categories, internal attributes and factors of market entry mode selection for internationalization of construction companies. This thesis focuses on China Communications Construction Company Ltd (hereinafter referred to as CCCC), representative of giant Chinese state owned construction companies, sets up the SWOT analysis and weight system and conducts strategic positioning. Based on the above strategic positioning, the author takes into consideration the national background of these companies and puts forward three assumptions and their theoretical framework. The thesis takes CCCC’s entry into the market of Kenya and Angola as an example, verifies the effectiveness and application of the theoretical framework, and makes up the deficiency of the theory on market entry mode selection for enterprise internationalization, providing reference for enterprises’ market entry practice. Key Words: Enterprise Internationalization; Market Entry Mode; Construction Company; Government Relations, China, Africa. JEl: M1, Management Resumo Quando as economias abertas atingem um determinado nível de desenvolvimento a internacionalização das empresas torna-se uma escolha inevitável. De acordo com a teoria de investiemnto directo de John Dunning, quando o rendimento per capita excede $3000, o investimento estrangeiro liquido será positivo. Com um crescimento económico rápido nas últimas três décadas, a posição económica internacional da China e influência melhoraram significativamente e o seu rendimento per capita ultrapassou os $4000. Atingiu, deste modo, o estágio defendido por Dunning. Esta tese tem como objecto de pesquisa as empresas “gigantes” estatais Chinesas do ramo das obras públicas e o autor analisa a envolvente interna e externa e a escolha estratégica dos modos de internacionalização das mesmas. Esta tese foca-se na empresa chinesa – China Communications Construction Company Ltd (CCCC), representante das empresas gigantes estatais chinesas de obras públicas, descrevendo o processo de realização da análise SWOT. Tendo por base o posicionamento estratégico da empresa, o autor analisa o contexto em que esta empresa se desenvolveu e avança com três pressupostos no que concerne à sua internacionalização. A tese compara também os processos de entrada da CCCC em Angola e no Quénia. Palavras Chave: Internacionalização, Modos de Entrada, Empresas de Obras Públicas, Relações com o Governo, China, África. JEL: M1, Management. Acknowledgements First, I would like to express my appreciation for my Portuguese supervisor Professor Nelson and his wife Professor Virginia. Both of them have worked in Macau for a long time and are famous for their research on Chinese issues, and they have kept lasting academic cooperation with several universities in China. Their erudite knowledge, wide international point of view, rigorous academic style and pragmatic approaches have left deep impression on me and my classmates, which benefits us for our whole life. My thanks go to my Chinese supervisor Professor Jing Runtian, also supervisor of my master degree and good teacher and friend for years. Young as he is, Professor Jing has become a famous expert on management theories and is definitely a future star of management theories in China. I admire his expertise in this field so much that with his guidance and influence, I become fond of research on management. I remembered one night in 2007, Professor Jing introduced to me the DBA program jointly organized by ISCTE and University of Electronic Science and Technology of China and encouraged me to pursue the doctoral degree, and he introduced me to Professor Nelson and Professor Virginia. I am grateful to my superiors and colleagues of China Communications Construction Company Ltd, including President Liu Qitao, Director of the Head office, Mr. Wu Licheng, Dr. Zhang Ying and Ms. Yang Fan. Facing the conflict between the work and study, my superiors and colleagues gave me so much understanding and support, which helped me complete all the investigations, inspections, interviews, questionnaires and case studies. I want to thank Wen Gang, President of China Road and Bridge Corporation (CRBC), Du Fei, general manager of CRBC Angola Office, Li Qiang, general manager of CRBC Kenya Office and Li Yi, General Manager, Angola Office of China Harbor Engineering Company, and Miao Jun, assistant general manager of Sinohydro International Company. My special thanks go to Mr. Li Juguang, senior translator of CRBC. Though fully engaged, they are willing to give me their hands and provide lots of information and first hand materials. Li Juguang and Dr. Zhang Ying sacrificed lots of time to translate, edit and text-proof this thesis, which deeply touched me. I also want to thank Dr. Tang Long and Dr. Cui Shian, besides their own research, they gave me much specific help in aspects of data collection, sorting out and statistics of questionnaires as well as text-proofing and edition. My thanks also go to Professor Xiao Wen, associate Professor Sun Ping and Mr. Chen Yang as they have overcome difficulties of the joint higher education cooperation program, such as large span of programs, complex background of candidates and difficulty in organization and language communication. Their hard work has made this program move forward smoothly. Last but not the least, I feel grateful to my family. The constant support from my virtuous wife Ding Yuemin and encouragement from my adorable daughter Yang Hanyu have boosted my morale in studies and research, which helped me overcome many difficulties, continue the studies and finally have this thesis accomplished. Contents Chapter 1: Introduction..................................................................................................1 1.1 Research Background .......................................................................................1 1.2 Research Content and Significance ..................................................................4 1.3 Design of Research Methodology.....................................................................6 1.4 Structure of the Thesis ......................................................................................6 Chapter 2: Literature Review.........................................................................................9 2.1 Internationalization and Related Concepts .......................................................9 2.1.1 Definition of Enterprise Internationalization..........................................9 2.1.2 Measurement of Enterprise Internationalization Level.........................10 2.2 Theoretical Analysis on Enterprise Internationalization Strategy...................12 2.2.1 Analysis on Factors Influencing Enterprise Internationalization Mode12 2.2.2 Analysis on Market Entry Mode of Enterprise Internationalization.....17 2.2.3 Strategy Selection for Internationalization Development of Enterprises24 2.3 Enterprise Strategy Theory ......................................................................29 2.3.1 Conception of Enterprise Strategy ........................................................29 2.3.2 Development of Enterprise Strategy Theory ........................................30 2.3.3 Enterprise Development Theory ...........................................................33 2.3.4 Diversification Strategy Theory of Enterprise