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Thursday, June 19, 2014

Paper by CEIBS Professors Wins IACMR Conference Award

 

Paper by CEIBS Professors Wins IACMR Conference Award
Professor Meyer (centre) accepting the Conference Theme Best Paper Award

June 19, 2014. Beijing - A paper co-authored by CEIBS Professor of Strategy and International Business Klaus E. Meyer and Professor of Finance and Accounting Oliver Rui received the Conference Theme Best Paper Award today at the 6th Biannual Conference of the International Association of Chinese Management Research (IACMR). The paper is entitled “The Upside and Downside of Local Political Risk: A study of FDI location choice in China”. Professors Meyer and Rui co-authored the paper with Yutao Wang of the School of Accountancy at Central University of Finance and Economics.

The paper explores how political risk shapes the business environment and influences the course of foreign direct investment (FDI) inflows not only at a national level, but also at the level of individual cities. It presents the research findings of the co-authors, who examined FDI data in 278 Chinese cities from 1992 to 2007. Their findings show that MNCs were deterred by instability of local political leadership, especially in areas where the general institutional environment was well developed. However when political change occurred in areas where local institutions were considered weak, the change had less of an impact on implementation of FDI decisions, because the change was often seen as a beacon of hope that the local environment would improve in the future. Similarly, the implementation of FDI projects is found to be inhibited by political risk at local level: if changes happen between the approval of a project and the completion of the project, some projects may be abandoned or only partially implemented. The authors attribute this to the disruption of business to government ties in the wake of political change. The authors suggest that the concern with local political risk likely applies globally, and is not specific to emerging markets or non-democratic regimes.