The Role of Culture in FDI in the PRC

Abstract

This paper examines the role that culture plays in Foreign Direct Investment (FDI) in the People's Republic of China (PRC). Using examples of inward FDI from mostly western Multinational Corporations (MNCs), the implication of Chinese culture, Transaction Cost Theory, and modes of entry are discussed. The authors suggest that the increase in, and the rate of direct FDI in the PRC (prior to the current worldwide economic crisis) raises important issues with respect to employment and talent management issues and organizations would be wise to consider the mode of entry and management practices if they are to be successful in China.