Current Research Projects

Foreign Direct Investment by Chinese firms (in partnership with Asia Pacific Foundation of Canada, and China Council for the Promotion of International Trade)

Project leaders: Kenny Zhang, Daniel Shapiro, Jing Li, Sudheer Gupta.

Description:

This is an annual survey of Chinese firms’ overseas investment activities. This year’s survey focuses on Chinese firms’ perceptions of political risks in a host nation as well as how they deal with political risks. The questionnaire will be sent to member firms of China Council for the Promotion of International Trade in October and will be collected in December. The results will be publicly available early 2013.

 

Innovation at the base of the pyramid (in partnership with Infosys Limited, Bangalore, India)

Project Leaders: Sudheer Gupta and Jai Ganesh (Infosys Limited).

Description:

The “base of the (economic) pyramid” (or BOP)–approximately 4 billion citizens of the world who live on the equivalent of less than $8 a day–constitutes a $5 trillion global market that remains un- or under-served. Large organizations, and multinational corporations in particular, have historically tended to focus their innovation efforts exclusively on the upper segments of the economic pyramid, presupposing a certain level of consumer knowledge, market conditions and resource availability. Serving BOP markets effectively requires rethinking and redesign of innovation processes typically employed by organizations to produce goods and services, and may require entirely new business models. Moreover, organizations will need to develop a learning capability to ‘trickle-up’ innovative ideas from BOP segments to developed markets, a process referred to as “reverse innovation”.

The objectives of this project are:

  1. To help develop a theory of product, service and business model innovation that allows organizations to meet the needs of BOP segments profitably, sustainably, and in socially responsible ways;
  2. To help stimulate research in market based approaches to economic development and poverty alleviation;
  3. To understand processes and organizational capabilities required for reverse innovation;
  4. To provide guidance to organizations and communities on how to develop successful innovations for global markets that originate in BOP segments.

 

Chinese natural resource investments in Africa

Project Leaders: Jing Li, Aloysius Newenham-Kahindi, Daniel Shapiro, Victor Chen.

Description:

In recent years there has been a rapid increase in the amount of FDI in natural resource industries by Chinese firms in Africa. Given the strategic importance of the natural resource sectors to host country governments, there is typically considerable bargaining over entry and operating terms, with attendant political risks. Using case studies in Tanzania, we find that the Chinese government and firms engage in a bargaining model different from the traditional models. Specifically, they typically engage in a modified one-tier bargaining model in which the Chinese government represents the collective interests of Chinese natural resource firms to negotiate with the host country government. In exchange for investment deals in the natural resource sector, the Chinese government offers a package with loans that support multiple purpose development projects in various sectors such as infrastructure and agriculture. Chinese firms act as a group to fulfill the Chinese government’s commitments to the host country government. We further discuss the boundary conditions for this Chinese style bargaining model and its relationship to political risk. Finally, we assess whether there is a unique Chinese overseas investment model in terms of the role played by the Chinese government, and conclude that the Chinese model does have unique elements, although they are likely limited to resource investments in developing countries.

Social Risk and Transparency in Global Supply Chains (in partnership with Infosys Limited, Bangalore, India)

Project Leaders: Sudheer Gupta, Lakshmi Vallapuzah (Infosys Limited).

Description:

Most global enterprises today have globally dispersed supply chains and operations, and need to assess the impact of their operations on local communities and the environment. In order to assess “social risk” stemming from global operations, organizations need a systematic way of understanding the laws, norms and expectations of society in every region or country they or their supply chain partners operate in; a framework to help incorporate social risk in organizational decision making; and, guidelines on how to mitigate social risk. This project has the following objectives:

  1. Define a framework and supporting platform and technologies that can help enterprises sense and assess their social risk.
  2. Create value measurement models to help identify the right areas to focus on and align initiatives and action towards minimizing risk and maximizing value.
  3. Create platforms and tools to enable continuous monitoring of risk.
  4. Create platforms and tools to enable engagement with stakeholders.
  5. Identify effective mechanisms for creating transparency and propagating sustainability and social responsibility goals across the supply chain.

FDI Spillovers at the National and Subnational Level: The Impact on Product Innovations by Chinese Firms

Project Leaders: Jing Li, Daniel Shapiro, Dong Chen.

Description:

Our study investigates the degree to which product innovations by emerging market firms are influenced by the presence of inward foreign direct investments (FDI). We begin with FDI spillover effects at the national level, the common approach in the literature. We further examine spillover effects at the subnational level because knowledge spillovers have been found to be localized. We study both intra-industry and inter-industry FDI spillovers in a subnational location, based on the distinction in the cluster literature between MAR (Marshall-Arrow-Romer) specialization externalities and Jacobian diversification externalities. Using information for over 346,000 Chinese manufacturing firms over 2000-2006, we find that Chinese firms improve their product innovations when they locate in cities with concentrated foreign innovative activities in the same industry; however, these intra-industry spillover benefits decrease quickly as the foreign presence increases and, at high levels of foreign concentration, are dominated by the crowding-out effect. We also find evidence of inter-industry spillover benefits in a city; diversity of industries with a foreign presence contributes to product innovation by Chinese firms.

Role of Emerging Market Multinationals in Global Natural Resources Industries

Project Leaders: Jing Li, Daniel Shapiro, Sudheer Gupta

PhD students: Pratick Mukherjee

Description:

This project focuses on foreign direct investments from emerging market companies in natural resources across the globe. We are investigating whether and how state-owned and private firms behave differently in seeking resources globally, and the role played by organizational and ownership structure of the parent firm on foreign investment behavior. We are also interested in whether and how emerging market firms invest in countries with rich natural resources but high political risks.