Are German pastures greener for Chinese dairy foreign direct investments?

Abstract

Abstract China has made extensive outward foreign direct investments (FDI) over recent years, and Chinese international dairy sector investments have been substantial. Germany is the largest European Union milk producer and significant exporter of dairy products to China, but has yet to host these investments. Scientific literature considering industry-level macro-environmental factor falls short in exploring this phenomenon, leading to the question of how can the absence of Chinese foreign direct investments in the German dairy industry be explained by factors in the macro business environment? Following an abductive approach, this study explores the question through an adapted PESTEL conceptualization and operationalization based on an extensive literature review, descriptive analysis of secondary data and triangulated with semi-structured expert interviews. Results show factors such as existing governance structures and legislative tightening may outweigh incentives such as product quality characteristics and consumer preferences, and potential deals should be approached cautiously from a commercial perspective. Regulators and policy makers should also not reject Chinese investment applications out of hand. Our PESTEL application additionally illustrates how the framework could be adapted for initial considerations of FDI. This study is of interest to management academics, and stakeholders in both Germany and the wider dairy industry.