Technological Assets and The Strategy of Foreign Firms to Enter the China Market

Entering neighbouring foreign markets through foreign direct investment (FDI) by firms from the newly industrialized economies (NIEs) is a striking phenomenon in recent years. This phenomenon, however, is difficult to explain by classical international production theory. This is because NIE firms normally do not possess proprietary advanced technology. This paper argues that technology by nature consists of two aspects: codified state of the art technology and tacit skills. Forms with different technological advantages may adopt different outward investment strategies. Transnational corporations from industrial countries are more likely to use their advanced technology to enter local markets. In contrast, firms from NIEs may try to exploit locally available cheap labor and land to take advantage of their experiences in labor intensive production.