Impact of regualtion on the formation of entry strategy of multinational banks - a case of foreign investment into the Chineses banking industry

Abstract

The purpose of this thesis is to both explore and explain the formation of entry strategies of the multinational banks (MNBs) investing in the People's Republic of China. The research is driven by an interest in understanding the strategic behaviour of the MNBs as they are presented with huge investment opportunities but potentially higher risks caused by the market and regulatory structures. The study explains the differences in entry strategies of the MNBs and explores the causes of convergence in their entry behaviours. The study is grounded in the eclectic theoretical paradigm based on which a conceptual framework is developed to incorporate three enabling factors for the competitive advantages of the MNB in the local market. The three enabling factors are also termed the OLI framework with regard to ownership-specific advantages (0), location-specific advantages (L) and internalisation-specific advantages (1). Correspondingly, three areas of literature are focused on in this research, namely, the resource-based view, the institutional theory and internalisation theory. The research design consists of in-depth case studies of ten multinational banks. The cases are analysed based on strategic entry decisions in four dimensions, namely, the entry motive decision, the entry mode decision, the management control decision and the marketing orientation decision. The cases are explored by means of semi-structured interviews of thirty-five senior bank managers based in the local branch in Beijing and/or Shanghai in China. . Four patterns of strategic entry decision are identified through this research. Using pattern-matching techniques of analysis, the research provides evidence to support two research propositions; they are: i) the strategic entry decisions of the multinational banks in China are different. The differences are mainly attributed to the differences of the bank specific resources and the existing strategies of the parent banks; and ii) under the coercively imposed regulatory conditions and the underdeveloped market conditions, the strategic entry decisions of the multinational banks in China have tended to converge. This thesis contributes to existing theoretical, empirical and practice literature. It integrates multiple perspectives in applying the OLI framework. The developed OLI framework both explains and explores the formation of entry strategy of service multinationals. It emphasises the strategic behaviour of the MNB and provides insights to the MNB regarding how to integrate strategic entry decisions with operation and behaviour. It also provides the regulators with the way to assess the impact of regulation on competition structure.