Abstract

We compare the patterns of Indian and Chinese companies’ FDI in Africa to explain how colonial history matters in international business. FDI activities of the historically colonizing countries are well documented. However, a less understood area is how the prior history of being colonized impacts these countries’ FDI activities. This gap in the literature is receiving greater attention as new emerging economies (i.e., India and China) are playing a more profound role in globalization. Specifically, colonial history and a series of historical incidents reshaped the institutional environment and organizational field where a unique set of isomorphic organizational actions emerged. We find that the patterns and focus of Indian and Chinese FDI in Africa reflect their colonial history as being colonized for their resource or consumer market, respectively. More importantly, this paper shows that given differences in history and institutional context, Indian and Chinese business groups exhibit distinct characteristics in their FDI motivations and strategies. Our study has important implications for MNE managers to overcome market imperfections in emerging markets.

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