Aid, State-Ownership, and the Location Decision of Chinese MNEs in Africa

Abstract

With the hybrid nature of government agencies and market players, state-owned enterprises (SOEs) tend to play multiple roles when they conduct FDI in host countries that receive aid from their home country. Bridging the literature that studies the impact of aid on FDI with the research on SOEs, we propose that SOEs are more likely to make FDI in aid recipient countries than privately-owned enterprises (POEs) from the same country. In addition, SOEs’ FDI in recipient countries not only mediates the positive impact of aid on POEs’ FDI in recipient countries, but also strengthens the impact as a moderator. Empirical research based on data of 3,758 Chinese FDI projects in Africa during 2001-2015 delivered support to the above arguments. The findings of this study extend the research on the relationship between aid and FDI, as well as the SOE literature.