Master Thesis Copenhagen Business School MSc. in Business and Development Studies (BaDS) Spring 2020 Chinese Businesses in the European Football Industry A case study on how Suning Holding Group acquire F.C. Internazionale Milano to assist in realizing Beijing Global Ambitions Picture: Jindong Zhang, Founder Suning Holding Group, at the F.C. Internazionale Milano home-ground, Stadio Giuseppe Meazza, San Siro district, Milan Student: Philip Sinkbæk Jensen (92768) Hand-In Date: 15 May 2020 Supervisor: Jakob Lindahl Word Count: 166.853 STUs – 73.3 p. Pages: 137 pages Executive Summary Background Encouraged by Xi Jinping’s anticipation for a Chinese football revolution, the government is actively formulating football development strategies under global ambition projects such as the Belt and Road Initiative and China First-policies. Beijing’s formulation of a multifold football development has di- rected Chinese companies to venture in European football clubs. The retail-giant, Suning Holding Group, holds 100 per cent of equity stocks in Italian-side FC Internazionale Milano. While Suning’s firm-specific assets aid Inter in building a reconceptualized business model to become financially self-sustainable, Suning is implicitly advocating for Beijing’s interest in global positioning. By nav- igating in a costly, yet competitive industry of international football, Suning is actively looking for business opportunities in Italy, which are realized in a signed MoU between Suning and the Italian Trade Agency. Chinese OFDI has become more than just equity-boosts for the lucky ones. Purpose The purpose of this paper is to provide insides to the new-modern OFDI phenomenon of Chinese companies investing in European football clubs to leverage resources of goodwill back to the home- market while facilitating business opportunities for host-markets abroad. This represents a completely new outlook of Chinese OFDI where international asset-augmenting is transferring resources and capabilities into unorthodox brands with the ambition of developing the brand. In this way, China builds strategically comprehensive partnerships with Italian authorities to establish new trade agree- ments for Italian brands to be channeled towards the purchasing power of the Chinese middle-class. Approach A single case study of how the acquisition of Suning and Inter Milano reconceptualize traditional OFDI strategy relying on classic strategic management- and internationalization theory. Results Football has become a catalyst for growth. Clubs are perceived as global brands and proper businesses with immense opportunities for growth and business development outside home. Football clubs be- come social institutions themselves while Suning becomes an institutional builder for Inter, Beijing and the ITA. In this way, Suning aids Inter in reaching the footballing elite and exploiting brand potential in China, Beijing in enhancing the BRI, and finally the ITA in accessing new business op- portunities in China, Keywords – China OFDI, Internationalization, Strategy, Firm-Performance, Suning, Inter Milan - 2 - Table of Content Executive Summary ................................................................................................................................................. - 2 - List of Figures and Tables ........................................................................................................................................ - 5 - List of Appendices ................................................................................................................................................... - 6 - List of Abbreviations ............................................................................................................................................... - 6 - 1 Introduction ................................................................................................................................................... - 7 - 1.1 The Nature of Research Field ................................................................................................................. - 8 - 1.2 Research Question ............................................................................................................................... - 11 - 1.3 Structure of the Thesis ......................................................................................................................... - 12 - 2 Literature Review ......................................................................................................................................... - 16 - (I) 2.1 Firm-Based View .................................................................................................................................. - 17 - 2.1.1 The Resource-Based View ............................................................................................................... - 17 - 2.1.2 Competitive advantage ................................................................................................................... - 18 - 2.1.3 OLI and OFDI Favorability ................................................................................................................ - 20 - 2.1.4 Emerging MarKet Firm FrameworK .................................................................................................. - 23 - 2.1.5 LinKage-Leverage-Learning Model ................................................................................................... - 26 - 2.1.6 Characteristics of Chinese OFDI at Firm Level .................................................................................. - 28 - (II) 2.2 Industry-Based View ........................................................................................................................ - 32 - 2.2.1 The Dynamics of the European Football Industry ............................................................................. - 33 - 2.2.2 Prevalent Football Business Models ................................................................................................ - 38 - 2.2.3 Re-ThinKing of Football Business Strategies ..................................................................................... - 40 - (III) 2.3 Institutional-Based View.................................................................................................................. - 45 - 2.3.1 Chinese OFDI Approaches ............................................................................................................... - 46 - 2.3.2 Government-Led Strategies for Internationalization ........................................................................ - 47 - 2.3.3 Xi Jinping’s Call for Football Reformation ......................................................................................... - 51 - 2.3.4 Operationalization of Theory ........................................................................................................... - 58 - 3 MetHodology ............................................................................................................................................... - 62 - 3.1 Philosophy of Science; Critical Realism ................................................................................................. - 63 - 3.2 Research Approach; Inductive .............................................................................................................. - 64 - 3.3 Research Strategy; Case Study Design .................................................................................................. - 65 - 3.3.1 Qualified Expert RemarKs ................................................................................................................ - 66 - 3.4 Methodological Choices; Mixed Methods ............................................................................................. - 73 - 3.4.1 Qualitative Methods ....................................................................................................................... - 73 - 3.4.2 Quantitative Methods ..................................................................................................................... - 74 - 3.5 Time Horizon ....................................................................................................................................... - 75 - 3.6 Data in Analysis ................................................................................................................................... - 75 - 4 Analysis ........................................................................................................................................................ - 76 - 4.1 Suning Holdings Group – Before Acquisition ......................................................................................... - 77 - 4.2 F.C. Internazionale Milano – Before Acquisition .................................................................................... - 78 - - 3 - 4.3 The New Era of Inter ............................................................................................................................ - 80 - 4.4 What traditional Chinese FDI approaches affect change in firm-based strategies? ................................ - 84 - 4.4.1 OFDI goes Busted in 2016 ................................................................................................................ - 84 - 4.5 How are government-lead strategies affecting Chinese investments? ................................................... - 92 - 4.6 What drives the fluctuating investment patterns from Chinese