Analyzing risk assessments of Chinese resource-based enterprises internationalization on the basis of Entropy value method Текст научной статьи по специальности «Экономика и бизнес»

ПРОБЛЕМЫ МИРОВОЙ ЭКОНОМИКИ

PROBLEMS OF INTERNATIONAL ECONOMY

УДК 339.9

DOI 10.17150/1993-3541.2015.25(6).1079-1084

ЧЕНЬ ЧОН

Хэнаньский государственный университет экономики и права, г. Чжэнчжоу, Китай

ИССЛЕДОВАНИЕ ОЦЕНОК РИСКА ИНТЕРНАЦИОНАЛИЗАЦИИ КИТАЙСКИХ СЫРЬЕВЫХ ПРЕДПРИЯТИЙ НА ОСНОВЕ МЕТОДА ЭНТРОПИИ

Аннотация. Статья посвящена описанию методов управления рисками на примере интернационализации китайских сырьевых предприятий. Рассматриваются проблемы и недостатки существующей системы организации управления рисками на предприятиях, а также зарубежный опыт их решения, при этом выделены и систематизированы общетеоретические и практические основы управления. Определены этапы интеграции предприятий в Китае, учитывающие стадии развития компаний и объем их производства. Исследованы вопросы интернационализации деловой активности китайских компаний. Оценка их деятельности произведена на основе метода энтропии и анализе рисков развития китайских сырьевых предприятий на мировой арене. Анализируются индикаторы риска, сопряженные с развитием китайских предприятий на международной арене. Перечислены показатели риска и приведен алгоритм их расчета. Подсчитаны различные уровни рисков, а также общие показатели риска, которые призваны проиллюстрировать воздействие различных рисков на интернационализацию сырьевых предприятий. Даны рекомендации по активизации интернационализации китайских сырьевых предприятий в международной бизнес-среде.

Ключевые слова. Теория энтропии; китайские сырьевые предприятия; интернационализация; оценка риска.

Информация о статье. Дата поступления 4 сентября 2015 г.; дата принятия к печати 26 октября 2015 г.; дата онлайн-размещения 30 декабря 2015 г.

Финансирование. Проект национального фонда по социальной науке (№ 12BGL002, 14FGL011); проект Министерства образования по научной программе гуманитарных и социальных наук (№ 12YJAZH135); Научная программа «мягкая наука» Министерства науки и техники провинции Хэнань (№ 142400410847); Научно-исследовательский проект «Хэнанской интеллектуальной мягкой науки» (№ 14080306); Ключевой научный проект вуза провинции Ханань (№ 15A630008).

CHEN CHONG

Henan University of Economics and Law, Zheng zhou, China

ANALYZING RISK ASSESSMENTS OF CHINESE RESOURCE-BASED ENTERPRISES INTERNATIONALIZATION ON THE BASIS OF ENTROPY VALUE METHOD

Abstract. This paper is intended to introduce the entropy value method use while studying risk assessments of Chinese resource-based enterprises internationalization. On the basis of the theoretical framework of risks management in resource-based enterprises internationalization and leaning on system analysis of the path, stages and risks of Chinese resource-based enterprises internationalization development, this paper proposes a constitution of risks of Chinese resource-based enterprises internationalization in conjunction with the field of research and the survey of complex assignments of risk indicators. Proceeding from that, the analysis of risk assessments of Chinese resource-based enterprises internationalization with the use of the entropy value method is conducted. Thus, the study of risk assessments from qualitative to quantitative in internationalization of Chinese resource-based enterprises proceeds. The goal of the research is to provide the experience for Chinese resource-based enterprises internationalization.

Keywords. Entropy value method; resource-based enterprise; internationalization; risk assessment. Article info. Received September 4, 2015; accepted October 26, 2015; available online December 30, 2015. Financing. The project is supported by National Social Science Foundation (Register Number: 12BGL002, 14FGL011); Humanities and Social Sciences Planning Project of Ministry of Education (Register Number: 12YJAZH135); Soft Science Research Planning Project of Henan Province (Register Number: 142400410847); Intellectual Property and Soft Science Research Planning Project of Henan Province (Register Number: 14080306); Key Scientific Research Project of Universities and Colleges in Henan Province (Register Number: 15A630008).

© Чень Чон, 2015

Izvestiya of Irkutsk State Economics Academy, 2015, vol. 25, no. 6, pp. 1079-1084. ISSN 1993-3541

PROBLEMS OF INTERNATIONAL ECONOMY

Instruction. With the gradual recovery of the global economy, the world has increased the demand for resource products. As the representatives of non-renewable resources, oil, natural gas, coal and iron ore have highlighted the scarcity of these resources. Thus, resource-based enterprises' internationalization has become very hot. International development enables these enterprises to participate in the configuration of global resources to ease the situation of the world energy crisis, to ensure the steady growth of the national economy and social and economic security. By participating in the mining of oil, natural gas, coal, iron ore and other resources in foreign countries, these enterprises ensure the sustained and stable supply of resources at home, which effectively fill the supply gap in the country's important resource commodities. Meanwhile, the international development can also enhance the enterprises' control of key resources and distribution channels, increasing the control of the international market, and make their voices of product pricing heard in the international market.

Starting with China's resources-based enterprises' international development path and development stage, this paper, combined with China's resource-based enterprises international development history as well, details and summarizes the risk that resource-based companies face with during the international development, and establish the risk index system of resource-based enterprises' international development. On this basis, combined with field research, surveys and other methods, the paper evaluates risk indicators with entropy analysis method, evaluate and analyze the risk of Chinese resource-based enterprises' internationalization qualitatively and quantitatively.

Literature Review. Entropy is first revealed and found by German physicist Clausius in 1868. Throughout the 140 years development history, Entropy, so to speak, is the best measure to «uncertainty». American scholar C. E. Shannon introduced Entropy into the information theory and proposed the concept of Entropy of Information. According to the basic principle of information theory, information is a measure to the degree of system order; while entropy is a measure to the degree of system disorder, the absolute value of the both is equal, but opposite in sign. After its application in the field of enterprise management, the word «Entropy of Management» was coined. Management entropy assumes that a company is a relatively closed system, elements such as or-

Известия Иркутской государственной экономической академии.

2015. Т. 25, M 6. С. 1079-1084. ISSN 1993-3541

ganization, method and regulation in the process of movement showed a decreasing of effective energy but an increasing of ineffective energy, from order to disorder, and with an increase in uncertainty.

Risk is the uncertainty caused by the loss. Many scholars introduce the theory of entropy into the Risk study. Based on the entropy theory, Zhang Jinle and Wang Runxiao (2010) set up the model of the entropy evaluation of the management of the Chinese University Presses, providing an effective analysis method for the assessment of the management risk. Guo Jia (2011) proposed the concept of risk entropy. Through the analysis of the basic framework of security system and components, he found the corresponding evaluation model, making use of the risk entropy to study the theory and method of the effectiveness of security systems and risk. According to the risk assessment model he established, Xing Wenyang (2013) proposed the method of risk assessment of urban power distribution network based on the information entropy theory, carrying out a risk assessment of the actual power grid with the established risk assessment model and method. Drawing on the existing research results, this paper evaluates and analyzes the risk of Chinese resource-based enterprises' internationalization.

Composition of Risk Indicators. Enterprises have to face different risks during their development of internationalization, including general risks and specific risks. In general, the former occurs in the process of enterprises' internationalization, while the latter only occurs in certain path or certain stage of enterprises' internationalization. Based on the theory of enterprises' internationalization path, stage of development and risk management, this paper established «3D» theoretical framework of China's resource-based Enterprises' Internationalization Risk, shown below as Chart 1.

Combined with the actual situation of China's resource-based Enterprises international development, through in-depth analysis of the different risks enterprises face with during their different international development stages and development paths, this paper, by means of field research, expert discussions, questionnaires and other methods, analyzes the composition of risk indicators of which Chinese resource-based enterprises' international development, based on the principle of comprehensiveness and independence. The composition of risk indicators includes eight first-class indicators and 35 second-class indicators ^able 1).

Izvestiya of Irkutsk State Economics Academy, 2015, vol. 25, no. 6, pp. 1079-1084. ISSN 1993-3541

Известия Иркутской государственной экономической академии.

2015. Т. 25, M 6. С. 1079-1084. ISSN 1993-3541

CHEN CHONG

Risk Countermeasures

Risk Control Risk Assessmen t

Risk Identification -

Environmental Analysis-

Strategic Target

Risk Management

Int'l Trad e

Int'l Investment

Int'l Co-op Int'l Development Path Import & ExportTrade Labor Co-op

^Overseas Investment in Factories 'Int'l Development Stage

Chart 1. The Theoretical Framework of China's Resources-based Enterprises' Internationalization Risk

Table 1

The Composition of Risk Indicators of Chinese Resource-based Enterprises' Internationalization

First-class Indicators Second-class Indicators

Political Risks War, system, state intervention, nationalization, government defaults, deferred payment

Policy Risks Environmental policies, laws, trade barriers, foreign exchange, taxes, price controls, fiscal and monetary policy

Economic Risks Exchange rates, interest rates, inflation, fluctuations in the economic cycle

Cultural Risks Values, communication, ethnic differences

Management Risks Decision-making, organizational management, social responsibility, project management, human resource management

Financial Risks Financing, investment, financial operations, profit distribution

Technical Risks Exploration, mining technology, production safety

Market Risks Market structure, market competition, market price

Entropy Assessment Model

1. Establish Assessment Matrix. For a risk assessment program with m evaluation index and n evaluation experts (Called (m, n) assessment), set aj is the jth expert assignment on jth indicators, including n experts assignment on m indicators, to form the evaluation matrix

A = (a,Lx„, i =1 2 m; j =1 2 n.

Through standardization, it gets a new matrix A = (a' ) , 0 < a' < 1.

2. Calculation of Entropy Values. Entropy Values can measure the amount of information. Positive entropy values represent an increase of invalid information or decrease of effective information. On the contrary, negative entropy represents the decrease of invalid information or increase of effective information. For the evaluation indicator, the calculation method of Entropy Value is:

n

H, = -K£Pj lnPj, i = 1, 2.....m; j = 1, 2.....n,

j = 1

in this formula

a' +10-4 K 1 P =-j-.

K =-, j n

lnn £(a' +10-4)

j = 1

3. Calculation of Entropy Weights. For the evaluation indicator, the calculation method of Entropy Weights is:

1 _m

1 - H +—Y(1 - H )

' 10 ^ ''

m I л m

I г- "■ + tG g(1 - H)

m

1 - h +—У(1 - H )

' igitr ''

m I i m

-g \H +I(1 - H)

(1)

, 0 < w,. < 1, g w,. = 1.

From Formula (1), It shows that Entropy Weights may indicate the role of indicator in the evaluation. The larger the indicator's entropy value is, the smaller its entropy weight becomes, the indicator

w=

Izvestiya of Irkutsk State Economics Academy, Известия Иркутской государственной экономической академии.

2015, vol. 25, no. 6, pp. 1079-1084. ISSN 1993-3541 2015. Т. 25, № 6. С. 1079-1084. ISSN 1993-3541

PROBLEMS OF INTERNATIONAL ECONOMY

is less important. On the contrary, the smaller the indicator's entropy value is, the larger its entropy weight becomes, the indicator is more important.

4. The Determination of Risk Value. If hi is the ith expert weight of the evaluation indicator, then the Risk Value of the first-level risk indicators is:

m m

Rk =£ w,H,.

i = i i = i

In the formula, Rk represents the risk value of the kth first-level risks, k = 1, 2, ..., b (b is the number of the first-level risk indicators).

The smaller Rk is, the more certainty of the evaluation is, and thus the risk is smaller. When Rk becomes smaller, or even close to «0», it indicates that the evaluation is close to certainty and there is almost no risk. On the contrary, when Rk becomes larger and even close to «1», it indicates that the evaluation does not have effective amount of information.

5. The Determination of Total Risk Value Rt. According to the above risk assessment values, the risk vector of the first-level indicator is obtained:

R' = (Ri, R2.....Rk.....Rb)■ (2)

Correspondingly, the first-level indicator's Entropy weight vector w is:

w = ^ wkwb^ (3)

in this formula

i- R,.

в-S Rk

-, S wk = i, 2.....b

Rf = S^Rk =S w'kRk

(4)

Empirical Analysis. Based on the foregoing analysis of the composition of risk indicators of Chinese resource-based enterprises' international development, we designed the questionnaire «The Study

on the Risk Control and Prevention of Chinese Resource-based Enterprise Internationalization». The subjects of the survey are the international management staffs and scientific experts from China's large resource-based companies, industry associations and research institutions. Among the 35 questionnaires distributed, 30 are valid; the recovery rate reached 85,7 %, which meets the requirements of the statistical sample. According to the analysis of risk acceptance criteria — ALARP and relevant literature, the author set the risk levels and decision-making criteria of the resource-based enterprises' international development, shown below as Table 2.

According to the survey results and the foregoing composition of risk indicator system of the resource-based enterprises' internationalization, the assessment matrix of the eight first-level indicators is:

A = (a ) ,

x V ij'mxn'

in the formula x = 1, 2, ..., 8; A\, A2, ..., A8 represent first-level risk indicators respectively: political risk, policy risk, economic risk, cultural risk, management risk, financial risk, technology risk and market risk.

1. Calculation of Entropy Values, Entropy Weights and Risk Values of First-level Indicators: - political risk

A standardized matrix can be drawn from A '= (a' ) as:

x V i¡ Smxn

А' =

From the formulas listed above, Probability Matrix, Entropy Values, Entropy Weights can be drawn correspondingly. Finally, Risk Values R1 = 0,674 661 can be drawn from formula (2);

Í i 0 0,75 0,75

i 0,75 0,75 0,75

0,75 0,75 0,75 0,75

0,666 667 0,666 667 0,75 0,5

0 0,75 0,75 0,75

v i 0 0,5 0,5

Table 2

Risk levels and Decision-making Criteria of the Resource-based Enterprises' International Development

k = i

k = i

Risk Level Risk Value Standard Values Rank of Risks Content

i i-4 0,0-0,i6 Very Low If the risk occurs, it has no impact on the company's international development, the company's development goals can be fully realized

2 5-8 i,i6-0,32 Low If the risk occurs, it will has a little impact on the company's international development, the company's development goals can still be realized

3 9-i2 0,32-0,48 Middle If the risk occurs, it will have an impact on the company's international development, the company's development goals can be partially realized

4 i3-i6 0,48-0,64 High If the risk occurs, it will have a greater impact on the company's international development, the company's development goals can be seriously undermined

5 i6-25 0,64-i,00 Very High If the risk occurs, it will fail the company's international development, it may even threaten the companies' survival

Izvestiya of Irkutsk State Economics Academy, Известия Иркутской государственной экономической академии.

2015, vol. 25, no. 6, pp. 1079-1084. ISSN 1993-3541 2015. Т. 25, № 6. С. 1079-1084. ISSN 1993-3541

CHEN CHONG

- similarly, the Entropy Values (H), Entropy Weights(W) and Risk Values (R) of policy risk, economic risk, cultural risk, management risk, financial risk, technology risk and market risk can be drawn.

2. Calculation of Total Risk Value. Risk Vector R' , Entropy Weight Vector w', Total Risk Value Rf can be drawn form formula (2)-(4) as:

R' = (R„ R2, R3, R4, R5, R6, R7, R8) = (0,674 661, 0,659 389, 0,657 872, 0,530 210, 0,622 219, 0,634 034, 0,590 125, 0,53973);

w' = (0,105 236, 0,110 176, 0,110 666, 0,151 964, 0,122 199, 0,118 377, 0,132 580, 0,148 803);

Rf = 0, 606 700.

3. Analysis of Risk Value

According to the result R, > R2 > R3 > R6 > R5 > > R7 > R7 > R4, it shows that is the largest one among the eight first-level indicators, that is, political risk has the biggest Entropy Values and smallest Entropy Weights, indicating that this indicator has the minimum amount of information that the objects can get from. The objects have the smallest certainty to political risk and thus have the biggest risk; On the contrary, is the smallest one among the eight first-level indicators, that is, cultural risk has the smallest Entropy Values

and biggest Entropy Weights, indicating that this indicator has the maximum amount of information that the objects can get from. The objects have the biggest certainty to cultural risk and thus have the smallest risk. The Total Risk Value Rf = 0, 606 700 is between 0,48-0,64, indicating that once the risk occurs, the international development goals can be seriously undermined.

Conclusion. Based on the enterprises' international development path, stage and risk management theory, this paper established the theoretical framework of risk management in resource-based enterprises' internationalization and analyzed the composition of risk indicators of Chinese resource-based enterprises' international development, combined with their international development stage and history. By means of expert discussions, questionnaires and other methods, the paper established the risk assessment model of resource-based enterprises' international development based on the entropy theory. Also, the paper completed the risk assessment and analysis of China's resource-based Enterprise international development, calculated Risk Values of various risk types and Total Risk Values, effectively reflected the impact of various risks on the internationalization of China's resource-based Enterprise.

References

1. Agarwal S. Choice of Foreign Market Entry Mode: Impact of Ownership Location and Internalization Factors / S. Agar-wal, S. N. Ramaswami // Journal of International Business Studies. — 1992. — № 1. — P. 1-27.

2. Brouthers K. D. Industrial sector perceived environmental uncertainty and entry mode strategy / K. D. Brouthers, L. E. Brouthers, S. Werner // Journal of Business Research. — 2002. — № 55. — P. 498-499.

3. Cheng Qi-yue. Research on Risk Measurement Based on Information Entropy / Qi-yue Cheng, Wanhua Qiu, We-ichao // Journal of Suzhou Vocational University. — 2011. — Vol. 01. — P. 1-4.

4. Kim W. C. Global Strategy and Multinationals' Entry Mode Choice / W. C. Kim, P. Hwang // Journal of International Business Studies. — 1992. — Vol. 23, № 1. — P. 29-53.

5. Kulkarni Subodh P. The Influence of the Type of Uncertainty on the Mode of International Entry / Subodh P. Kulkarni // American Business Interview. — 2001. — January. — P. 96-108.

6. Kwok Chuck C. Y. Internationalizatjon and Firm Risk: An Upstream-Downstream Hypothesis / Chuck C. Y. Kwok, David M. Reeb // Journal of International Business studies. — 2000. — Vol. 3l, № 4. — P. 611-629.

7. Miller K. D. A Framework for Integrated Risk Management in the International Business / K. D. Miller // Journal of International Business Studies. — 1992. — Vol. 23, № 2. — P. 311-331.

8. Pan Yigang. The Hierarchieal Model of Market Entry Modes / Yigang Pan, David K. Tse // Journal of International Business Studies. — 2000. — Vol. 31, № 4. — P. 535-554.

9. Root F. R. Entry Strategies for International Markets / F. R. Root. — New York : Lexington Books, 1994. — 323 p.

10. Schmidt Christian W. The effect of exchange rate risk on U.S. foreign direct investment: An empirical analysis / Christian W. Schmidt, Udo Broll. — Dresden, 2008. — 25 p. — (Discussion Paper Series in Economics, no. 09/08).

11. Tse David K. How MNCs Choose Entry Modes and Form Alliances: The China Experience / David K. Tse, Yigang Pan, Kevin Y. Au // Journal of International Business Studies. — 1997. — Vol. 28, № 4. — P. 779-805.

12. Wang Ailing. The risk evaluation of agent management projects on the basis of Entropy measurement method / Ailing Wang, Shaonan Sun // China Management Informationization. — 2009. — № 9. — P. 108-111.

13. Wang Runxiao. Entropy Value Method in Operational Risk Evaluation of University Press / Runxiao Wang, Jinle Zhang // Journal of Lanzhou University. Social Sciences. — 2010. — Vol. 01. — P. 20-24.

14. Xu Hui. A Study on the Key Risk Identification of the Enterprises'International Operation / Hui Xu, Juan Yu // Nankai Business Review. — 2007. — № 04. — P. 92-97.

15. Xu Hui. Key Risk Identification, Measurement and Governance Mechanism in Multinational Operation — Based on the Shareholding Structure / Hui Xu, Huimin Zou // Chinses Journal of Management. — 2009. — № 05. — P. 684-692.

Izvestiya of Irkutsk State Economics Academy, Известия Иркутской государственной экономической академии.

2015, vol. 25, no. 6, pp. 1079-1084. ISSN 1993-3541 2015. Т. 25, № 6. С. 1079-1084. ISSN 1993-3541

PROBLEMS OF INTERNATIONAL ECONOMY

16. Yothin Jinjarak. Foreign direct investment and macroeconomic risk / Jinjarak Yothin // Journal of Comparative Economics. — 2007. — № 35. — P. 509-519.

17. Yu Hong. The risks of coal enterprise internationalization stratagem and it's prevention / Hong Yu, Yong-xiang Peng, Hualing Song // China Coal. — 2005. — № 8. — P. 25-27.

18. Zhang Jinle. The Deficiencies and Amendments of the Formulate of Entropy and Entropy Weight in the Theory of Entropy / Jinle Zhang, Jie Ren // Statistics & Information Forum. — 2011. — № 1. — P. 3-5.

Информация об авторе Чень Чон — доктор экономических наук, Институт менеджмента, Хэнаньский государственный университет экономики и права, 450046, Китай, г. Чжэнчжоу, ул. Тиншуэ, 1, е-таН: chenchong109@sohu.com.

Библиографическое описание статьи Чень Чон. Исследование оценок риска интернационализации китайских сырьевых предприятий на основе метода энтропии / Чень Чон // Известия Иркутской государственной экономической академии. — 2015. — Т. 25, № 6. — С. 1079-1084. — DOI : 10.17150/1993-3541.2015.25(6).1079-1084.

Author

Chen Chong — Doctor habil. (Economics), Henan University of Economics and Law, Henan 450002, China, Zheng zhou City 450046, Henan Province, P. R. China, e-mail: chenchong109@sohu.com.

Reference to article Chen Chong. Analyzing risk assessments of Chinese resource-based enterprises internationalization on the basis of entropy value method. Izvestiya Irkutskoy gosudarstvennoy ekonomicheskoy akademii = Izvestiya of Irkutsk State Economics Academy, 2015, vol. 25, no. 6, pp. 1079-1084. DOI: 10.17150/1993-3541.2015.25(6).1079-1084. (In Russian).