Outward Foreign Direct Investment In Countries Research Articles

How business environment of countries along the Belt and Road impacts China’s OFDI efficiency: a stochastic frontier gravity model approach

The Belt and Road Initiative (BRI) provides a new opportunity for the continued deepening of economic and trade cooperation between China and countries along the BRI route. However, different business environments among countries have led to the problem of a low and uneven distribution of China’s overall trade and investment efficiency in the countries along the route. Using the stochastic frontier gravity model, this study evaluates the efficiency of China’s outward foreign direct investment (OFDI) based on the data of 47 countries along the Belt and Road route from 2013 to 2019. The empirical results indicate that the efficiency level of China’s OFDI in countries located along the Belt and Road route is 43.39%, which suggests a regional imbalance. In terms of business environment factors, regulatory governance, civic discourse, government accountability, and regulatory quality in host countries have a positive impact on China’s OFDI. The positive effects of the BRI have enabled Chinese enterprises to better face factors such as political instability, corruption and imperfections in the legal system when investing abroad. The findings and suggestions could help the governments and enterprises of the countries along the route improve the business environment in a more targeted manner, enhance the space for economic and trade cooperation, and promote the common development of the countries along the route.

China’s Outward Foreign Direct Investment and the Environmental Performance of the “Belt and Road Initiative” Countries

Since the launch of the “Belt and Road Initiative” (BRI) in 2013, China’s outward foreign direct investment (OFDI) has grown rapidly. Moreover, the environmental protection issues introduced by these investment behaviors to BRI countries have attracted widespread attention from the international community. With the unbalanced panel data of 66 BRI countries from 2006 to 2020, this paper studied the impacts of China’s OFDI on the environmental performance of BRI countries from a systemic and partial perspective. We found that from a systemic perspective, China’s OFDI is conducive to the improvement of the comprehensive environmental performance of countries along the “Belt and Road”. From a partial perspective, the environmental performance influences of China’s OFDI in countries along the “Belt and Road” are threefold: (1) China’s OFDI can help mitigate climate change; (2) China’s OFDI improves wastewater treatment capacity; and (3) China’s OFDI has no significant impact on air quality. Therefore, China’s OFDI needs to continue its efforts to promote and improve the environmental performance of BRI countries to achieve their sustainable development goals. Some BRI developing countries should gradually change their extensive economic growth models; reduce their share of high energy-consuming, high-pollution, and inefficient industries in the national economy; and expand the proportion of their environmentally friendly industries while refraining from improving environmental performance by imposing high environmental pollution taxes.

China’s Outward Foreign Direct Investment and Bilateral Trade Potential: A Theoretical and Empirical Study

As a large developing country, China’s outward foreign direct investment (OFDI) and its relationship to trade have always been subjects of extensive scrutiny in academic circles. With the continuous advancement of the “Belt and Road” initiative (BRI), the pace of overseas expansion by Chinese firms has accelerated. This paper theoretically constructs a firm heterogeneity model of China’s OFDI and bilateral trade, and conducts research based on panel data of China’s OFDI in countries along the BRI from 2003 to 2019. The results show that China’s OFDI can substantially enhance the potential for bilateral trade, and this conclusion remains robust after overcoming endogeneity and economic fluctuations. In a heterogeneity test, China’s OFDI in countries along the “Land Silk Road” is shown to have a greater effect on trade potential than in countries along the “Maritime Silk Road.” In the controlled test, China’s OFDI to BRI countries has a greater role in upgrading trade potential than investment in other trading powerhouses. China’s OFDI can promote the economic development of host countries along the BRI by strengthening the potential for bilateral trade. The results of this study are not only conducive to the “going global” of Chinese enterprises but also of practical significance for host countries to achieve high-quality economic development.

Technology seeking, R&D localization and comparative advantage: evidence from Chinese R&D-oriented OFDI

ABSTRACT Using the logit model of discrete explained variable, this article explores the theoretical logic and underlying mechanism of Chinese outward foreign direct investment (OFDI) in developed countries. It finds that Chinese enterprises conduct R&D-oriented OFDI in countries with advanced technologies and rich R&D resources. These enterprises seek to learn applied rather than cutting edge technologies. Furthermore, Chinese R&D-oriented OFDI, which focuses on technology seeking and R&D localization, follows the principle of comparative advantage. The research provides new evidence for OFDI from China and a theoretical explanation of its underlying logic.

Belt and Road Initiative and OFDI from China: the paradox of home country institutional environment between state and local governments

PurposeThis study aims to explore the effect of the home country institutional environment on firms’ outward foreign direct investment (OFDI) and how it is affected by institutional environment differences across home country subregions. Drawing on transaction cost theory, this paper examined the relationship between the Belt and Road Initiative (BRI) and Chinese firms’ OFDI, as well as the moderating roles of local government officials’ career horizons and state ownership.Design/methodology/approachA sample of 5,018 Chinese firm-year observations with foreign investment activities was used over 11 years to estimate a panel-feasible generalized least square regression model.FindingsThe results show that the BRI improves Chinese firms’ OFDI in countries along the BRI route. Furthermore, this positive relationship is weaker for firms where provincial officials have longer career horizons and is stronger for state-owned enterprises (SOEs) compared to non-SOEs.Originality/valueThe findings confirm the positive effect of home country institutional environment on firms’ OFDI. Furthermore, the multiple government perspective offers new insight into the effects of the home country’s institutional environment on OFDI.

How Does Chinese Outward Foreign Direct Investment Respond to Host Country Cultural Tolerance and Trust?

Based on 2010 to 2019 Chinese outward foreign direct investment (OFDI) panel data from 39 host countries, this paper studies the relationships between host country cultural characteristics and Chinese OFDI. The OLS regression results show that the cultural tolerance and trust in the host countries are significantly positively correlated with Chinese OFDI, which are robust according to the system GMM tests. Further analysis reveals that cultural tolerance is more positively related to Chinese OFDI in host countries with higher legislation and economic freedom, while cultural trust is positively associated with Chinese OFDI in host countries with lower legislation and economic freedom. In addition, higher cultural tolerance and trust promote Chinese OFDI in countries with greater cultural distance. Unlike traditional studies based on cultural distance in international trade, using more representative cultural characteristics, this paper provides references to Chinese OFDI decision-making based on the root characteristics associated with heterogeneous cultural influences.

The Promotion Effect of the Belt and Road Initiative on China’s Foreign Direct Investment: An Empirical Analysis Based on Firm Level

Based on the dataset of listed companies in China from 2014 to 2017, this study uses difference in differences (DID) and propensity score matching (PSM) approaches to systematically evaluate the promotion effect of China’s Belt and Road Initiative (BRI) on Chinese firms’ outward foreign direct investment (OFDI). The empirical findings are as follows: (a) after the initiative, listed Chinese firms have significantly increased OFDI in countries along the Belt and Road, but this result cannot be clearly attributed to the implementation of the policy; (b) compared with firms that have already invested in countries along the Belt and Road, the initiative has strongly encouraged uninvested listed firms to invest along the BRI routes; (c) the new entry incentives of OFDI firms have industry differences in investment choices; (d) the shareholding ratio of state-owned investors has no impact on the policy effect. Based on the findings, we put forward some policy recommendations to help firms invest in the countries along the Belt and Road better.

China’s ODI Motivations, Political Risk, Institutional Distance and Location Choice

Utilizing an outward foreign direct investment (ODI) data sample of 48 countries and districts from the year 2003 to 2010, and based on institutional distance theory, a resource-based view, an institutional-based view and political risk management theory, this paper applies multiple regression equations to explore the linkages between China’s ODI motivations, political risk, institutional distance and location choice. We obtain the following conclusions: 1) there are three different motivations affecting China’s ODI location choice, namely, resource-seeking, strategic asset-seeking and market-seeking motivations; 2) generally, China’s multinational enterprises are inclined to invest ODI in countries with high political risk and short institutional distance; and 3) multinational enterprises with different ODI motivations have diverse location choices. For resource-seeking foreign investment, Chinese multinational enterprises tend to invest in countries with high political risk and short institutional distance. For strategic asset-seeking foreign investment, Chinese multinational enterprises tend to avoid countries with high political risk and short institutional distance. For market-seeking foreign investment, multinational enterprises of China tend to avoid countries with high political risk and short institutional distance.