Location decisions of Chinese firms in the global tourism industry: The role of prior international experience and diplomatic relations

Abstract

As latecomers to the global tourism industry, Chinese multinational enterprises (MNEs) encounter difficulties to engage in outward foreign direct investments relying only on their firm-specific assets. As a result, they usually resort to external resources, combining them with the generic capabilities they possess. One source of these alternative resources derives from the existence of good diplomatic relations between China and other countries. Friendly bilateral relationships may provide Chinese firms with useful institutional support to compensate for their latecomer disadvantages when establishing in foreign destinations. Drawing on the composition-based view and the international political economy perspective, this study argues that the combination of firm's prior international experience and good diplomatic relations between countries is positively associated with location decisions of Chinese tourism MNEs. The findings indicate that high-level government official visits and strategic partnerships contribute to that compositional effect.