312
AFRICA
’
S SILK ROAD
:
CHINA
AND INDIA’
S NEW ECONOMIC FRONTIER
enter in ways that reduce risks, such as through acquiring an existing operation. With greater familiarity of a market or greater
willingness to incur risk, foreign investors have felt more comfortable entering by establishing greenfield (or de novo) operations. Of course, in settings where existing firms are either very limited in number or insufficiently commercially attractive for buyouts or joint ventures, the options for entry will be more limited.
In the case of Chinese
and Indian investors in Africa, surveyed firms exhibit a strikingly different pattern of entry see table 6.2. In contrast to entrepreneurs from India, who, like their European counterparts, have had relatively longer commercial ties with Africa and tend to initiate investments in the African market through both de novo entry as well as acquisition
of existing businesses, the vast majority of Chinese firms have entered Africa through greenfield investments. To some extent, these differences might be explained by the variance in sectoral orientation between the surveyed Chinese and Indian firms, although such
variance is relatively limited, and it also does not appear to break along sectoral lines where inherent risks differ significantly or potentially acquirable African businesses are unlikely to exist;
see table 6.3 and table A in the annex to chapter Instead, that an overwhelming portion of surveyed Chinese firms investing in Africa have done so through de novo entry may suggest that such enterprises simply do not pursue a relatively strong risk-averting business strategy or perhaps they find fewer benefits to rapidly integrating into African
markets than do Indian firms, a notion that other evidence appears to support.
26
Scale of Investment and Corporate StructureThe ability of firms in Africa to achieve lower production costs to better exploit export opportunities and climb the value chain through network
TABLE 6.2
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