All in the same key? How state policy pressure and local fiscal pressure jointly shape Chinese firms’ OFDI within Belt and Road initiative

Abstract

ABSTRACT This study aims to examine the effect of state policy pressure on firms’ international expansion and how it is affected by the difference in the public fiscal situation across home-country subregions. Based on longitudinal data from 2013 to 2021 for 4,323 listed firms in China, the results show that: (i) firms that face higher policy pressure from the Belt and Road Initiative (BRI) are more likely to increase their outward foreign direct investment (OFDI) in countries along the BRI route; (ii) this positive relationship is less pronounced for firms headquartered in regions experiencing greater fiscal pressure; (iii) the moderating effect of local fiscal pressure on the relationship between BRI policy pressure and firms’ OFDI to the BRI countries is less pronounced when firms are owned by the central government. These findings shed light on how firms’ strategic responses to the home-country institutional environment are contingent upon both competing institutional pressures and organizational attributes.