How to Transform Liability of Foreignness into Asset of Foreignness under the “Belt and Road” Initiative? A Case Study from the Perspective of Social Network

Abstract

Under the “Belt and Road” Initiative （BRI）, Chinese companies’ “go-global” has gradually become an important strategy for industrial upgrading. However, many “go-global” companies have met the liability of foreignness （LOF）, including legitimacy problems and the threat of exit. How to overcome LOF has become an urgent problem for the overseas subsidiaries of “go-global” companies.We illustrate our arguments through a single case of Chinese multinational subsidiary Taiwenlong Cement Co., Ltd. in Cambodia. This paper studies from the perspective of social network analysis to identify the source of LOF, and discusses the mode of transforming LOF into the asset of foreignness （AOF）. The case company, Taiwenlong Cement Co., Ltd., is a joint venture between a Chinese company and a host-country company. As a representative of the successful transformation of LOF into AOF, this project experienced both the “honeymoon period” and the “setback period” in its construction and operation process and finally gained a foothold in Cambodia after various attempts.Based on the case analysis, we find that under the BRI, LOF of foreign subsidiaries of Chinese companies in countries along the BRI shows dynamic changes. This paper has several contributions: Firstly, under the BRI, the government-enterprise relationship and industrial chain relationship of the host country are important sources of LOF. Secondly, with the development of Chinese companies’ “go global”, the focus of overcoming LOF has gradually shifted from the national level to the industrial level. The key to the transformation of AOF and LOF lies in matching the adequate industry chain network. Finally, the home government support, technology transfer and industrial agglomeration can promote the transformation of LOF into AOF in the industry chain. Therefore, we construct three transformation routes: （1）Multi-agent centralization mode, through which foreigners can use different types of network resources including not only the government, shareholders, industrial partners in the home country, but also the subjects of local network in the host country, to obtain higher network status in a situation where foreigners can afford a high level of LOF.（2）Foreignness centralization mode, in which foreigners can establish a self-centered industrial chain network, occupying an intermediary role in the flows of information and resources in the case that they can dominate the allocation of network resources.（3）Industrial centralization mode, in which foreign companies can build network with a few industrial partners through the scale advantage of industrial clusters under the case of relatively scarce network resources. The conclusions of this paper have positive implications for the promotion of high-quality development of BRI and Chinese private companies to “go global”.