Mexican OFDI in China—Ownership Advantages to Gain New Markets: Two Case Studies

Abstract

This paper seeks to analyze recent Mexican OFDI in China. Its main purpose is to present two different forms in which Mexican MNGs have successfully used their ownership advantages to establish production subsidiaries in China and operate in the processed food and auto parts markets. It also argues about a foreseeable increase of capital flows between the two nations, particularly from Mexico to China in the near future. Its starting point is a general framework concerning the growing China-Mexico economic relations. In the second part there is a discussion on the specific evolution of Mexican OFDI since the 1990s in order to analyze the particularities of recent investments in China. Finally there is an analysis of the driving factors of Mexican OFDI through two case studies: Grupo BIMBO (food) and Nemak (auto parts). The methodological orientation of this paper is based on the dynamic version of the eclectic (OLI) paradigm that studies international production. The main findings of this paper are that certain ownership advantages possessed by these firms: innovative distribution systems (BIMBO) and technological innovations (Nemak) have encouraged them to invest successfully in emerging markets that have similar market structures, in this case China.