Chinese FDI in the French and Australian Wine Industries: Liabilities of Foreignness and Country of Origin Effects

Abstract

This paper explores the recent evolution of Chinese investment in the wine industries in the Bordeaux region of France and Western Australia (WA). The study identifies variations in the nature of the investments undertaken, which are not always consistent with existing theory. We explore how these differences impact on the liability of foreignness (LOF) experienced (Eden and Miller, 2004; Zaheer, 1995). We find evidence of all three of the categories of hazards identified by Eden and Miller (2004), with unfamiliarity being particularly significant, especially for wholly owned investments. We postulate that differences in context between home and host countries are a key factor explaining both the observed difficulties and the differences in experiences. The findings of our work on LOF, in terms of its nature and mitigating strategies, resonate well with existing theory, although we also find evidence of a Country of Origin (COO) effect, both in terms of Liability of Origin (LOR) and Assets of Foreignness (AOF). The variations in entry mode and LOF, however, are less consistent with existing research and pose questions in relation to the interaction between the home and host contexts, company strategy and LOF.