Why Have All Western Internet Firms (WIFs) Failed in China? A Phenomenon-Based Study

Abstract

This paper uses phenomenon based research to examine why all western internet firms (WIFs) have failed in China. In contrast to western firms from other sectors which have all achieved different levels of success, no WIFs, from search engines, internet content providers, social networks, to e-commerce and sharing economy platforms, have been able to beat their Chinese competitors and achieve sustainable operational success in China. Government censorship and control and cultural differences between China and the West are often cited as main reasons for such failures, but similar conditions existed in other countries, such as Indonesia or Saudi Arabia, which did not prevent WIFs such as Google from dominating over 90% of their search markets. Existing international business theory, the Ownership-Location-Internalisation (OLI) Eclectic Paradigm, failed to offer plausible explanations. Using comprehensive empirical evidence gathered from two rounds of elite interviewing, this paper identifies the key factors and the prevailing narratives from both the inside view and outside view to explain why all WIFs have failed in China. The theoretical and managerial implications are discussed. Future research should examine the key factors that led to the systematic failure of WIFs in China, particularly by testing propositions and developing new theoretical frameworks.