The strategic motives that inspire Multi – national corporations to involve in FDI have been a base of discussion for many years among researchers. It has been argued that foreign direct investment, or FDI, can provide individual firms significant competitive advantage, improve their financial position, raise capacity utilization, and raise technological standards (Gillespie, 2012). Many of the previous studies rely on the resource-based view of the firm, also termed as RBV, and the organizational learning perspective, or OLP, to gain a better understanding of the initial motives, as well as the growth and development strategies of Multi – national corporations in China.
Furthermore, testing the nature of the initial investment decision from a different factors, researchers suggest that possible motivations behind perspectives- seeking and market-seeking behavior can be divided in two dimensions—external market factors and internal company reasons (Mutinelli and Piscitello, 2008). External market motivations consist of those elements in the foreign market that make that market attractive to a Multi – National Corporation. One such factor revolves around common human resource practices in the host country. The sub-constructs of this factor include labor costs, the degree of unionization, safety and labor policies, and the skill level of workforce. Interestingly, strict labor policies in the home country can likewise serve as a motivator to seek FDI opportunities (Said and McDonald, 2012). On the other hand, availability of labor, skill level of labor and the cost of labor may serve as a strong motivator for foreign investment.
According to entrepreneurs, for those companies with extensive international market often find the less attractive, more uncertain markets of interest to them (Economist, 2008a). Some researchers demonstrated the market size as a primary factor for entry into China, which has had unprecedented success in attracting FDI. Moreover, the vastness of the Chinese market, as well as the rapidly improving infrastructure, made investment attractive in the Chinese market place (Economist, 2008b).