Chinese Geographical Science ›› 2013, Vol. 23 ›› Issue (5): 594-606.doi: 10.1007/s11769-013-0603-z

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Foreign Direct Investment with Chinese Characteristics:A Middle Path Between Ownership-Location-Internalization Model and Linkage-Leverage-Learning Model

SI Yuefang1,2, Ingo LIEFNER1, WANG Tao3   

  1. 1. Department of Economic Geography, Justus Liebig University Giessen, 35390 Giessen, Germany;
    2. School of Resource and Environment Science, East China Normal University, Shanghai 201204, China;
    3. School of Geography Science, Nanjing Normal University, Nanjing 210023, China
  • Received:2012-07-23 Revised:2012-10-24 Online:2013-09-10 Published:2013-09-23
  • Contact: WANG Tao,E-mail:
  • Supported by:

    Foundation item: Under the auspices of National Natural Science Foundation of China (No. 40971069, 41101120), State Scholarship Fund by China Scholaship Council, Ministry of Education of the people's Republic of China (No. 2009614028)


The majority of multinational enterprises (MNEs) traditionally originate from developed countries. In the last ten years, however, there has been dramatic growth in foreign direct investment (FDI) from China. It is a comparatively new phenomenon that challenges the classic FDI theories. In this paper, we review the pros and cons of two important theories, known as the Ownership-Location-Internalization (OLI) model and Linkage-Leverage-Learning (LLL) model, and use the statistical data and company case studies from China to test the plausibility of these two models. We believe that neither of them suits totally: the OLI model is quite useful for understanding FDI from China to developing economies, while the LLL model is more powerful for explaining the FDI to developed economies. We argue that the companies from China attain a very advantageous position as intermediates in the global economy. They may catch up with the first movers if they integrate OLI-led and LLL-led FDI within one firm. This combination can bring together the most advanced knowledge acquired in developed economies with the knowledge about adaptation needs and the needs for cost reduction in production as expressed in developing economies. It may also accelerate the knowledge transfer globally. We thus fill a gap in research into the geographical pattern of Chinese FDI and offer a deeper understanding of the internationalization of Chinese MNEs and revolving knowledge transfer.

Key words: outward foreign direct investment (FDI), Ownership-Location-Internalization model, Linkage-Leverage-Learning model, China