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Does distance from government hinder enterprises’ OFDI？Evidence from China

Author

Listed:
  • Wang, Long
  • Ji, Wenjun
  • Zhang, Teng
  • Liu, Xiaoqian

Abstract

This study analyzes the impact of government–enterprise distance on the probability of outward foreign direct investment (OFDI) with matched data from Chinese prefecture-level municipal governments, the Chinese industrial enterprises database, and the directory of overseas investment enterprises. We determine that increased distance between the government and enterprises has a significant negative impact on the probability of enterprises’ OFDI. Mechanism analysis demonstrates that increased government–enterprise distance, which causes higher information search and relationship building costs, and decreased accessibility of public service, are the main reasons for this decline.

Suggested Citation

  • Wang, Long & Ji, Wenjun & Zhang, Teng & Liu, Xiaoqian, 2025. "Does distance from government hinder enterprises’ OFDI？Evidence from China," Economic Systems, Elsevier, vol. 49(2).
    • Handle: RePEc:eee:ecosys:v:49:y:2025:i:2:s093936252400092x
    DOI: 10.1016/j.ecosys.2024.101270
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    More about this item

    Keywords

    Grabbing hand hypothesis; Government–enterprise distance; OFDI JEL classification codes: C26; D22; D82;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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