Leadership Positioning Among U.S. Firms Investing in China

Abstract

This study investigates leadership positioning by U.S. firms in China using the awareness, motivation, capability (AMC) perspective. We define leadership as first in industry to invest in China, and find that leaders have characteristics associated with higher AMC, evidenced by pre-existing international experience, greater marketing intensity, smaller firm size, and higher labor costs. Notably, the motivation to lower labor costs and the prior capability in international operations mattered only for the first wave of firms leading industry investment earlier in time, while smaller firms exhibited a preference to lead investment in less popular provinces. In addition, we examine choice of entry mode and find that leaders with ownership and internalization advantages are more likely to choose entry modes that offer ownership control over flexibility, consistent with internalization theories. The study provides a unique view on how AMC characteristics influence international investment decisions, suggesting that firms both strategically lead and strategically follow.