Economics and Eclectic Paradigm

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LUND UNIVERSITY School of Economics and Management Department of Economics

Internationalization of Chinese MNEs and Dunning’s Eclectic (OLI) Paradigm: A Case study of Huawei Technologies Corporation’s Internationalization Strategy

Author: Beiguang Zhu Supervisor: Professor Sonja Opper

Master Thesis June 2008


I would like to express my gratitude to all those who gave me the possibility to complete this thesis.

I am deeply indebted to my supervisor Professor Sonja Opper from the Department of Economics, School of Economics and Management, Lund University, whose stimulating suggestions and continuous encouragement helped me throughout my graduate career and during completion of this thesis.

I want to thank Heidi Li, Senior Branding Manager, Corporate Branding and Communications Department of Huawei Technologies Corporation for giving me permission to commence this thesis in the first instance, to do the necessary research work and to use the official data.

Especially, I would like to give my special thanks to my wife Binbin Xiang, whose patient love enabled me to study in Sweden and complete this paper.

Beiguang Zhu Lund May, 2008


Abstract Today the newly emerging Chinese MNEs have increasingly been involved in the internationalization activities, but they have not attracted adequate attention in terms of internationalization studies. This paper will be based on Dunning’s Eclectic (OLI) Paradigm as theoretical foundation and deploy the method of case study to analyze the internationalization strategy of the Chinese high-technology MNE - Huawei Technology Corporation. This study intends to answer 3 questions: 1) What are the key components of Huawei’s internationalization strategy? 2) How much will Dunning’s eclectic paradigm of international production be applied to explain Chinese MNE - Huawei’s internationalization? 3) What are the special characteristics of the Huawei’s internationalization process, which might be the supplements to the existing Dunning’s eclectic paradigm? The evidences of case study show that the existing OLI paradigm still needs to be modified so as to apply to the MNEs from developing countries, and improved in order to explain all MNEs to a greater extent. The key findings are as follows: 1) Possessing comparative advantages may not be the prerequisite of MNEs’ engagement in FDI. MNEs from developing countries adopt catch-up strategy in their internationalization process. Therefore, enhancing their ownership advantages becomes a dynamic learning process. 2) In terms of location choice, MNEs from developing countries lay emphasis on achieving strategic goals and international layout. Therefore, they pay more attention to potential opportunities rather than worrying about economical and political instability, natural disaster and physic distance. 3) During the internalization process, MNEs from developing countries are more interested in the opportunities of enhancing transaction value rather than reducing transaction cost. The case of Huawei also suggests that the Dunning’s eclectic paradigm should take account of the potential exogenous institutional factors of home country and endogenous incentives of enterprise, especially the role of government and entrepreneurship in the context of transition economy.

Keywords: Case study, Chinese MNE, Huawei, Dunning Eclectic Paradigm, OLI, Internationalization, FDI.


ABBREVIATIONS BT: CAGR: CDB: CEO: CFIUS: CMM: China Eximbank: DWDM: ETS: FDI: FhG: HSDPA: H3C: IPD: ISC: ITU: LDCOM: M&A: MDA: MII: MNE: MOFCOM: MSAN: NGN: Oa: Ot: OLI: OMA: PwC: R&D: SDH: SOE: TD-SCDMA: UNCTAD: UMTS: U.S.A.: WAN: WCDMA: 21CN: 3G: 3GPP: British Telecom Compound Annual Growth Rate China Development Bank Chief Executive Officer Committee on Foreign Investment in the United States Capability Maturity Model The Export-Import Bank of China Dense Wavelength Division Multiplexing European Telecommunications Standards Institute...
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