Defensive Internationalization under Global Value Chain Restructuring: Evidence from a Chinese Battery Materials Supplier

Abstract

Global value chains are restructuring, and geopolitical risks are rising. For manufacturing firms in emerging economies, going overseas has shifted from a strategic option to an urgent necessity. This is particularly visible in China’s new energy sector, where upstream battery material suppliers face a "perfect storm": fierce domestic price wars, thinning margins, and a heavy reliance on a few powerful clients who are expanding globally. Consequently, for these suppliers, going global is less about chasing opportunity and more about responding to structural pressure. Using a qualitative case study of a Chinese battery material manufacturer expanding into Europe, we examine how senior managers interpret and justify these high-stakes decisions. Through in-depth interviews, we explore the logic of internationalization where the supplier has limited bargaining power. We find that their Foreign Direct Investment (FDI) was not driven by the traditional search for efficiency or market control. Instead, managers describe a path of "defensive internationalization." To maintain their position in the supply chain, the firm had to follow clients to specific locations, accept compliance-oriented joint ventures, and prioritize supply chain security over ownership advantages. By revisiting the OLI paradigm through this specific context, this study illustrates how asymmetric buyer–supplier relationships reshape international strategy. It offers a grounded explanation of why firms expand even when they lack traditional advantages, providing practical insights for managers and policymakers navigating these complex survival decisions.