Breaking into China: Strategic considerations for multinational corporations

International firms can adopt different strategies when breaking into an emerging market such as China. This article studies three strategic choices facing multinational corporations (MNCs): labour-intensive vs. capital- and technology-intensive; coastal vs. inland location; and joint venture vs. wholly-owned investment. Using hierarchical regression analysis on data from 223 large, foreign-invested electronics firms in China, we offer interesting findings as to how and why different strategies affect the performance of foreign direct investment. We show that MNCs pursuing a capital- and technology-intensive strategy in China have a significantly better performance than those pursuing a labour-intensive strategy. Our study also documents significant interaction effects between ownership arrangements and technology intensity on firm performance. On the other hand, the effect of a firm's location and ownership arrangements appear insignificant. To compete successfully in China today, firms cannot just focus on cheap labour and the production of low value-added goods; a capital- and technology-intensive strategy is more rewarding.