Impact of Historical Conflict on FDI Location and Performance: Japanese Investment in China

Gerald Yong Gao; Danny Tan Wang; Yi Che

doi:10.1007/978-3-030-80383-4_9

Impact of Historical Conflict on FDI Location and Performance: Japanese Investment in China

Gerald Yong Gao, Danny Tan Wang, Yi Che^*

^*Corresponding author for this work

Department of Management, Marketing and Information Systems

Research output: Chapter in book/report/conference proceeding › Chapter › peer-review

Abstract

Historical relations between countries bring important explanatory power for foreign direct investment (FDI) decisions, yet little is known on whether a home–host country relation exhibits heterogeneous effects on FDI across the country’s subnational regions. In this study, we examine the long-term impact of historical conflict on FDI location choices and performance. Using a sample of 8646 Japanese FDI in China, we show that civilian casualties in different provinces of China during the Second Sino–Japanese War exert deterring effects on Japanese FDI location choices. Furthermore, we demonstrate that civilian casualties negatively affect Japanese FDI performance and political capital accumulation strategies, in the forms of excessive tax payment and local employment, can reduce this negative effect. This study contributes to the discussion on how within-country differences of historical factors affect FDI location decisions and performance. The findings on firms’ political capital accumulation strategies also provide important implications for FDI operation in an environment characterized by historical animosity.

Original language	English
Title of host publication	Crises and Disruptions in International Business
Subtitle of host publication	How Multinational Enterprises Respond to Crises
Editors	Murad A. Mithani, Rajneesh Narula, Irina Surdu, Alain Verbeke
Place of Publication	Cham
Publisher	Palgrave Macmillan
Chapter	9
Pages	189–232
Number of pages	44
Edition	1st
ISBN (Electronic)	9783030803834
ISBN (Print)	9783030803827, 9783030803858
DOIs	https://doi.org/10.1007/978-3-030-80383-4_9
Publication status	Published - 25 Apr 2022

Publication series

Name	JIBS Special Collections
ISSN (Print)	2397-8775
ISSN (Electronic)	2397-8783

User-Defined Keywords

FDI
Historical conflict
Japanese firms
Location
Performance
Political capital
China

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10.1007/978-3-030-80383-4_9

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Gao, G. Y., Wang, D. T., & Che, Y. (2022). Impact of Historical Conflict on FDI Location and Performance: Japanese Investment in China. In M. A. Mithani, R. Narula, I. Surdu, & A. Verbeke (Eds.), Crises and Disruptions in International Business: How Multinational Enterprises Respond to Crises (1st ed., pp. 189–232). (JIBS Special Collections). Palgrave Macmillan. https://doi.org/10.1007/978-3-030-80383-4_9

Gao, Gerald Yong ; Wang, Danny Tan ; Che, Yi. / Impact of Historical Conflict on FDI Location and Performance : Japanese Investment in China. Crises and Disruptions in International Business: How Multinational Enterprises Respond to Crises. editor / Murad A. Mithani ; Rajneesh Narula ; Irina Surdu ; Alain Verbeke. 1st. ed. Cham : Palgrave Macmillan, 2022. pp. 189–232 (JIBS Special Collections).

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title = "Impact of Historical Conflict on FDI Location and Performance: Japanese Investment in China",

abstract = "Historical relations between countries bring important explanatory power for foreign direct investment (FDI) decisions, yet little is known on whether a home–host country relation exhibits heterogeneous effects on FDI across the country{\textquoteright}s subnational regions. In this study, we examine the long-term impact of historical conflict on FDI location choices and performance. Using a sample of 8646 Japanese FDI in China, we show that civilian casualties in different provinces of China during the Second Sino–Japanese War exert deterring effects on Japanese FDI location choices. Furthermore, we demonstrate that civilian casualties negatively affect Japanese FDI performance and political capital accumulation strategies, in the forms of excessive tax payment and local employment, can reduce this negative effect. This study contributes to the discussion on how within-country differences of historical factors affect FDI location decisions and performance. The findings on firms{\textquoteright} political capital accumulation strategies also provide important implications for FDI operation in an environment characterized by historical animosity.",

keywords = "FDI, Historical conflict, Japanese firms, Location, Performance, Political capital, China",

author = "Gao, {Gerald Yong} and Wang, {Danny Tan} and Yi Che",

note = "Yi Che gratefully acknowledges support from the Young Scientists Fund of the National Natural Science Foundation of China (NSFC, Grant No. 71703099) and the Shanghai Pujiang Program (16PJC048).",

year = "2022",

month = apr,

day = "25",

doi = "10.1007/978-3-030-80383-4_9",

language = "English",

isbn = "9783030803827",

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Gao, GY, Wang, DT & Che, Y 2022, Impact of Historical Conflict on FDI Location and Performance: Japanese Investment in China. in MA Mithani, R Narula, I Surdu & A Verbeke (eds), Crises and Disruptions in International Business: How Multinational Enterprises Respond to Crises. 1st edn, JIBS Special Collections, Palgrave Macmillan, Cham, pp. 189–232. https://doi.org/10.1007/978-3-030-80383-4_9

Impact of Historical Conflict on FDI Location and Performance: Japanese Investment in China. / Gao, Gerald Yong; Wang, Danny Tan; Che, Yi.
Crises and Disruptions in International Business: How Multinational Enterprises Respond to Crises. ed. / Murad A. Mithani; Rajneesh Narula; Irina Surdu; Alain Verbeke. 1st. ed. Cham: Palgrave Macmillan, 2022. p. 189–232 (JIBS Special Collections).

Research output: Chapter in book/report/conference proceeding › Chapter › peer-review

TY - CHAP

T1 - Impact of Historical Conflict on FDI Location and Performance

T2 - Japanese Investment in China

AU - Gao, Gerald Yong

AU - Wang, Danny Tan

AU - Che, Yi

N1 - Yi Che gratefully acknowledges support from the Young Scientists Fund of the National Natural Science Foundation of China (NSFC, Grant No. 71703099) and the Shanghai Pujiang Program (16PJC048).

PY - 2022/4/25

Y1 - 2022/4/25

N2 - Historical relations between countries bring important explanatory power for foreign direct investment (FDI) decisions, yet little is known on whether a home–host country relation exhibits heterogeneous effects on FDI across the country’s subnational regions. In this study, we examine the long-term impact of historical conflict on FDI location choices and performance. Using a sample of 8646 Japanese FDI in China, we show that civilian casualties in different provinces of China during the Second Sino–Japanese War exert deterring effects on Japanese FDI location choices. Furthermore, we demonstrate that civilian casualties negatively affect Japanese FDI performance and political capital accumulation strategies, in the forms of excessive tax payment and local employment, can reduce this negative effect. This study contributes to the discussion on how within-country differences of historical factors affect FDI location decisions and performance. The findings on firms’ political capital accumulation strategies also provide important implications for FDI operation in an environment characterized by historical animosity.

AB - Historical relations between countries bring important explanatory power for foreign direct investment (FDI) decisions, yet little is known on whether a home–host country relation exhibits heterogeneous effects on FDI across the country’s subnational regions. In this study, we examine the long-term impact of historical conflict on FDI location choices and performance. Using a sample of 8646 Japanese FDI in China, we show that civilian casualties in different provinces of China during the Second Sino–Japanese War exert deterring effects on Japanese FDI location choices. Furthermore, we demonstrate that civilian casualties negatively affect Japanese FDI performance and political capital accumulation strategies, in the forms of excessive tax payment and local employment, can reduce this negative effect. This study contributes to the discussion on how within-country differences of historical factors affect FDI location decisions and performance. The findings on firms’ political capital accumulation strategies also provide important implications for FDI operation in an environment characterized by historical animosity.

KW - FDI

KW - Historical conflict

KW - Japanese firms

KW - Location

KW - Performance

KW - Political capital

KW - China

U2 - 10.1007/978-3-030-80383-4_9

DO - 10.1007/978-3-030-80383-4_9

M3 - Chapter

SN - 9783030803827

SN - 9783030803858

T3 - JIBS Special Collections

SP - 189

EP - 232

BT - Crises and Disruptions in International Business

A2 - Mithani, Murad A.

A2 - Narula, Rajneesh

A2 - Surdu, Irina

A2 - Verbeke, Alain

PB - Palgrave Macmillan

CY - Cham

ER -

Gao GY, Wang DT, Che Y. Impact of Historical Conflict on FDI Location and Performance: Japanese Investment in China. In Mithani MA, Narula R, Surdu I, Verbeke A, editors, Crises and Disruptions in International Business: How Multinational Enterprises Respond to Crises. 1st ed. Cham: Palgrave Macmillan. 2022. p. 189–232. (JIBS Special Collections). doi: 10.1007/978-3-030-80383-4_9

Impact of Historical Conflict on FDI Location and Performance: Japanese Investment in China

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