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Institutional difference and outward FDI: Evidence from China

Institutional difference and outward FDI: Evidence from China
Institutional difference and outward FDI: Evidence from China
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.
Institutional difference, Outward foreign direct investment, Gravity model, China
0377-7332
Li, Chengchun
0ee7a126-be5b-4b56-81f4-5dc2d5b2b1c0
Luo, Yun
2ac0f228-573d-43e7-b309-1529b6f3d174
De Vita, Glauco
002fc6bf-e5ed-4a13-8993-0ce5e1fc2005
Li, Chengchun
0ee7a126-be5b-4b56-81f4-5dc2d5b2b1c0
Luo, Yun
2ac0f228-573d-43e7-b309-1529b6f3d174
De Vita, Glauco
002fc6bf-e5ed-4a13-8993-0ce5e1fc2005

Li, Chengchun, Luo, Yun and De Vita, Glauco (2018) Institutional difference and outward FDI: Evidence from China. Empirical Economics. (doi:10.1007/s00181-018-1564-y).

Record type: Article

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.

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Accepted/In Press date: 31 August 2018
e-pub ahead of print date: 5 September 2018
Keywords: Institutional difference, Outward foreign direct investment, Gravity model, China

Identifiers

Local EPrints ID: 438345
URI: http://eprints.soton.ac.uk/id/eprint/438345
ISSN: 0377-7332
PURE UUID: e160eebc-0267-403a-8af5-947f408d03eb
ORCID for Yun Luo: ORCID iD orcid.org/0000-0001-8409-366X

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Date deposited: 06 Mar 2020 17:30
Last modified: 28 Apr 2022 02:29

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Contributors

Author: Chengchun Li
Author: Yun Luo ORCID iD
Author: Glauco De Vita

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