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Institutional difference and outward FDI: evidence from China

Author

Listed:
  • Chengchun Li

    (Changzhou University)

  • Yun Luo

    (Centre for Business in Society, Coventry University)

  • Glauco Vita

    (Centre for Business in Society, Coventry University)

Abstract

This paper investigates the impact of institutional difference on China’s outward foreign direct investment (OFDI) through a gravity model. Our estimations are based on a large panel of 150 countries over the period 2003–2015. The results show that the institutional differences of government effectiveness and control of corruption between China and a host country have a statistically significant negative effect on China’s OFDI. In addition, our empirical evidence suggests that the ‘One Belt, One Road’ policy does not have the expected positive effect on China’s OFDI. Consistent results are obtained from a set of robustness tests. Our findings provide a reasonable guideline for countries aiming to attract Chinese OFDI or seeking factors to boost it.

Suggested Citation

  • Chengchun Li & Yun Luo & Glauco Vita, 2020. "Institutional difference and outward FDI: evidence from China," Empirical Economics, Springer, vol. 58(4), pages 1837-1862, April.
    • Handle: RePEc:spr:empeco:v:58:y:2020:i:4:d:10.1007_s00181-018-1564-y
    DOI: 10.1007/s00181-018-1564-y
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    Cited by:

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    3. Wang, Xiaoying & Anwar, Sajid, 2022. "Institutional distance and China's horizontal outward foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 1-22.
    4. Amar Anwar & Ichiro Iwasaki, 2022. "Institutions and FDI from BRICS countries: a meta-analytic review," Empirical Economics, Springer, vol. 63(1), pages 417-468, July.
    5. Doytch, Nadia, 2021. "Do FDI inflows to Eastern Europe and Central Asia respond to the business cycle? A sector level analysis," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).
    6. Libman, Alexander & Stone, Randall W. & Vinokurov, Evgeny, 2022. "Russian power and the state-owned enterprise," European Journal of Political Economy, Elsevier, vol. 73(C).
    7. Shuzhong Ma & Mengheng Liu, 2020. "Spatial correlation effect of China's outward foreign direct investment in countries along the One Belt and One Road," Pacific Economic Review, Wiley Blackwell, vol. 25(2), pages 228-249, May.
    8. Jin, Gang & Shen, Kunrong & Jiang, Yue, 2021. "Does the Belt and Road Initiative cause more troubled Chinese overseas investments?," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 217-232.
    9. Muhammad Farhan Bashir & Benjiang MA & Luqman Shahzad & Biao Liu & Qiangjia Ruan, 2021. "China's quest for economic dominance and energy consumption: Can Asian economies provide natural resources for the success of One Belt One Road?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 570-587, April.
    10. Yan Li & Xiaohan Zhang & Chenxin Jin & Qingbo Huang, 2022. "The Influence of Reverse Technology Spillover of Outward Foreign Direct Investment on Green Total Factor Productivity in China’s Manufacturing Industry," Sustainability, MDPI, vol. 14(24), pages 1-17, December.

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    More about this item

    Keywords

    Institutional difference; Outward foreign direct investment; Gravity model; China;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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