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A dual lens examination of peer effects on OFDI: Learning and competition perspectives

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  • Li, Zhongyuan
  • Chen, Shuo
  • Ye, Ruike
  • Chen, Wenzhi

Abstract

The motivation for outward foreign direct investment (OFDI) has consistently been a focal point in international business research. Using data from listed Chinese firms, this study examined whether peer effects drive OFDI. We meticulously identified peer effect-driven OFDI as an enterprise engaging in OFDI in a country where other firms from the same city and industry have already invested. Our findings revealed that peer firms’ OFDI activities significantly influence focal firms’ OFDI behavior, and learning and competition mechanisms drive these peer effects. The peer effects are more pronounced among firms that are larger, older, more profitable, or state-owned. Furthermore, under the learning mechanism, firms exhibit rational OFDI behavior, favoring geographically or culturally proximate countries. In contrast, under the competition mechanism, firms exhibit irrational OFDI behavior, preferring to invest in geographically or culturally distant countries. These results offer valuable insights for policymakers seeking to guide firms toward rational OFDI.

Suggested Citation

  • Li, Zhongyuan & Chen, Shuo & Ye, Ruike & Chen, Wenzhi, 2026. "A dual lens examination of peer effects on OFDI: Learning and competition perspectives," Research in International Business and Finance, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:riibaf:v:82:y:2026:i:c:s0275531925005069
    DOI: 10.1016/j.ribaf.2025.103250
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