Abstract

As a leading foreign investor among all emerging countries, China has been developed to investigate in severalstudies by focusing on inward foreign or outward foreign investment, respectively. However, limit has been related to the relationship between Inward Foreign Direct Investment (IFDI) and Outward Foreign Direct Investment (OFDI), relying on the evidence from China. As the conditions and variables that characterized theIFDI and OFDI have been overhauled, a new framework is required to evaluate their relationship, relating therole of entrepreneurial characteristics. In this study, on the basis of the planned behavior theory, we investigatethe relationship between IFDI, entrepreneurial behavior and OFDI in a structural contingency framework. Collecting China’s panel data set of ten main industrial areas in the period from 2003 to 2012, we first developthe panel unit root tests and Hausman test for the panel data measures. Then, applying the Pooled RegressionModel test, we secondly hypothesis and conclude that the IFDI is negatively related to OFDI in China. We alsofind evidence that OFDI is significantly influenced by the entrepreneurial behavior in China—outwards entrepreneurial behavior, “the index of entrepreneurs’ confidence (EEI)” is negatively related to OFDI while the inwards entrepreneurial behavior, “the index of business condition (BCI)” is positively related to OFDI in China.

Highlights

  • As the emergence of China is nowadays regarded as a global economic powerhouse among business and policy circles in the world, many attentions on China’s economic prowess have been focused on its sustained high economic growth of the last two decades

  • The results show that inward foreign direct investment (IFDI) is negatively related to outward foreign direct investment (OFDI) in China (β=-0.95, p < .001)

  • As the results show a negative relationship between IFDI and OFDI, Hypothesis 1 is supported in this study

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Summary

Introduction

As the emergence of China is nowadays regarded as a global economic powerhouse among business and policy circles in the world, many attentions on China’s economic prowess have been focused on its sustained high economic growth of the last two decades This high level of economic growth has been driven in part by massive inflows of foreign direct investment (IFDI) and by the rapid expansion of exports (Wang & Swain, 1997; Liu et al, 1997b; Liu et al, 2002), which are regarded as outward internationalization. In terms of China’ internationalization process, a stream of research dealing with its inward foreign direct investment (IFDI) since the 1980s and its outward foreign direct investment (OFDI) more recently (Luo, Xue & Han, 2010; Ramasamy, Yeung & Laforet, 2012)

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