The Support Process of External Experts in China FDI Projects

Abstract

Applying a modified version of the grounded theory approach (M-GTA), this paper develops a dynamic process view of interactions among external experts, firm managers and environmental factors in Foreign Direct Investment projects by Japanese firms in China. To focus on the process, we interviewed seven experts who specialize in China FDI support, including a lawyer, an FDI servicer, an accountant, a consultant, a market researcher think-tank coordinator and a bank officer. As a result, two processes, 1) self-monitoring of interactions and 2) assessment of client perception and situational context, are identified. As the process makes progress from 'encounter phase' to 'propinquity phase', the psychological distance gradually decreases as the external experts deploy interactions such as 'prompting to discharge contexts' and 'attendance on decision-making'. However, reactions also arose from clients, such as 'weak recognition of necessity of external experts' and 'trait forming in utilization of external experts'. Finally, the process reaches a 'unification phase' or 'divorce phase' as the client's decision. Yet, clients who decided not to utilize the external experts face difficulty in dealing with stakeholders in local situations. Understanding the mechanism and benefits of the FDI dynamic process model, external experts can set up more adequate interactions with clients, whilst firm managers can successfully manage the project.