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German companies engaging in China: Decision-making processes at home and management practices in Chinese subsidiaries

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  • Piotti, Geny

Abstract

This paper attempts to explain why internationalization processes to China are growing despite the significant difficulties that foreign direct investments into China encounter. The answer to this question can be found in the processes of decision-making on internationalization at the company level and how these affect management practices in Chinese subsidiaries. The argument I put forward in this paper is that for the small and medium-sized enterprises the study focuses on, the decisions concerning investment in China are mainly the product of structural and legitimation pressure. Structural pressure can encourage cognitive mechanisms and behavioral consequences similar to those occurring when individuals (and organizations) cope with threat. Legitimation pressure can foster wishful thinking, which pushes actors to believe that desired options are good despite evidence to the contrary. These pressures have an impact on how well companies are prepared when they internationalize and can particularly affect some crucial management practices, leading to inefficiencies and problems in subsidiaries.

Suggested Citation

  • Piotti, Geny, 2009. "German companies engaging in China: Decision-making processes at home and management practices in Chinese subsidiaries," MPIfG Working Paper 09/14, Max Planck Institute for the Study of Societies.
    • Handle: RePEc:zbw:mpifgw:0914
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    References listed on IDEAS

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    1. Beckert, Jens, 2000. "Economic sociology in Germany," economic sociology. perspectives and conversations, Max Planck Institute for the Study of Societies, vol. 1(2), pages 2-7.
    2. Zahra, Shaker A. & Korri, Juha Santeri & Yu, JiFeng, 2005. "Cognition and international entrepreneurship: implications for research on international opportunity recognition and exploitation," International Business Review, Elsevier, vol. 14(2), pages 129-146, April.
    3. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    4. Jens Beckert, 2003. "Economic Sociology and Embeddedness: How Shall We Conceptualize Economic Action?," Journal of Economic Issues, Taylor & Francis Journals, vol. 37(3), pages 769-787, September.
    5. David Dequech, 2003. "Cognitive and Cultural Embeddedness: Combining Institutional Economics and Economic Sociology," Journal of Economic Issues, Taylor & Francis Journals, vol. 37(2), pages 461-470, June.
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    Cited by:

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    2. Beckert, Jens, 2014. "Capitalist dynamics fictional expectations and the openness of the future," MPIfG Discussion Paper 14/7, Max Planck Institute for the Study of Societies.

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