Supranational institutions and location choice of outward direct investment: evidence from China’s Yangtze River Delta region

Abstract

ABSTRACT Existing international business researches mainly focus on the influences of unilateral institutional factors of host country or home country, as well as the institutional distance factors on location choice of outward direct investment, but the effects of bilateral relations as supranational institutions are largely neglected. Based on institutional theory, this paper explores the impacts of bilateral economic and political relations on location choice of China firms’ outward direct investment, the interaction effect between the two, and the moderating effect of ownership. Using data of Chinese-listed firms from 2002 to 2012 in the Yangtze River Delta, we find that: firstly, bilateral economic and political relations both have positive impact on location choice; secondly, bilateral economic and political relations have substitution effect on location choice; thirdly, firms’ state ownership has no significant moderating effect on bilateral relations and location choice.