CEO’s with global experience and outward foreign direct investment: a contextualized analysis of Chinese firms

• Published in: Chinese management studies Vol. 15; no. 1; pp. 1 - 23
• Main Authors: Sun, Kai, Fung, Hung-Gay, Zeng, Yuping, Qiao, Penghua
• Format: Journal Article
• Language: English
• Published: Bradford Emerald Publishing Limited 15.03.2021; Emerald Group Publishing Limited
• Subjects: Chief executive officers; Decision making; Dependency theory; Education; Emerging markets; Foreign investment; Globalization; Hypotheses; Industrialized nations; Managers; Manufacturing; Organizational change; Ownership; Power; Regression models; China; CEO power; CEO global experience; SOEs; Outward foreign direct investment
• ISSN: 1750-614X; 1750-6158
• DOI: 10.1108/CMS-11-2019-0405

Purpose This paper aims to examine the effect of chief executive officers (CEOs’) global experience (GE) on the Chinese firms’ outward foreign direct investment (OFDI) and provides new insights on how CEOs’ foreign study and education experiences may affect firms’ OFDI. Further, this paper examines whether CEO power and state ownership have a positive moderating effect on the relationship between CEOs’ GE and firms’ OFDI. Design/methodology/approach This study used panel data of Chinese manufacturing companies in 2007-2016 to examine different hypotheses. The authors tested them using a zero-inflated negative binomial regression model to shed light on the effect of CEOs’ GE on the firms’ OFDI. Findings This study found that CEOs’ GE generally promotes Chinese firms’ OFDI. CEOs’ foreign study experience has a stronger effect than foreign education experience. Further, CEO power and state ownership have a positive moderating effect on the relationship between CEOs’ GE and firms’ OFDI. Research limitations/implications The findings have two important implications for managers and policy-makers. First, globally experienced CEOs are vital for firms to succeed in today’s highly competitive global environment. Second, CEO power is important in firms’ OFDI decision-making. Originality/value The authors use path dependency and upper echelons theories to show that GE, particularly foreign study experience, enables CEOs to take advantage of available resources in the market and institutional environment to create a path for the firm to expand globally.