Among the emerging countries, China holds an incomparably high potential for MNCs to leverage their competencies, both as a place to produce and source products and as a consumer market. However, the leveraging of the firm's competencies to exploit this potential is often constrained not only by unreliable infrastructure and an inadequate supply of managerial talent but also by the lack of transparency in the Chinese institutional (business, legal, and political) environment. Still, China represents the biggest single business opportunity for any MNC, compelling it to engage in exploration, learn how to plan its global expansion, and leverage its resources and competencies in the challenging Chinese institutional environment (Conklin & Lecraw, 1997; Novicevic & Harvey, 2004b; Sarnie, Yip & Luk, 2005).
In this paper, we examine IKEA's expansion into the Chinese market. We use the institutional competency-based perspective to develop a theoretical explanation of IKEA's exploratory, learning-oriented entry into China. Specifically, our approach explains how IKEA's traditional competency base needed to be preserved, renewed, adapted, and reinvented to match the market and institutional demands of the Chinese context. The focus of our theory-based analysis is on the identification of the enabling and constraining factors that could influence IKEA's success in China. Based on this analysis, the specific learning path of IKEA is mapped in terms of how the company penetrates the Chinese market. In conclusion, the outcomes of IKEA's learning are outlined and illustrated with its concrete plans and actions in the Chinese context.