Abstract
This study explores the impact of local protectionism on outward foreign direct investment (OFDI) and how firms respond to local protectionism in a transition economy. We find that local protectionism exerts a negative effect on the OFDI decisions of Chinese privately-owned enterprises (POEs). However, this negative impact is weakened by POEs’ corporate philanthropy strategy, whereas corporate political activity reinforces such an impact. This research extends the lens of institutional escapism by highlighting local protectionism as a barrier to OFDI and provides new insights into how firms respond to the subnational environment by adopting various nonmarket strategies.
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