China's outward foreign direct investment: Location choice and firm ownership

This article evaluates the international location decisions made by public listed Chinese firms during the period 2006-2008, using a Poisson count data regression model. Further, we categorize the firms into state-controlled and privately owned according to majority ownership. We find that the determinants of internationalization differ based on ownership. State-controlled firms are attracted to countries with large sources of natural resources and risky political environments. Private firms are more market seekers. Although all firms have strategic intent, the attraction is commercially viable technology rather than core research content. Our findings also show that existing theories can sufficiently explain the actions of private Chinese firms, but adjustments are needed to understand the behavior of state-controlled multinationals.     

外商直接投资对中国对外贸易发展的影响

纵观世界各国,无论是在发达国家还是在发展中国家,经济增长都与外贸发展有着密切的联系.在改革开放的中国,外商直接投资(FDI)和对外贸易同步发展,两者相互促进、相互补充共同推动了中国经济的发展.本文旨在分析外商直接投资对中国外贸总量、进出口、外贸结构等方面的影响,并对提高外商直接投资的外贸效益给出了政策性的建议.     

Accounting for quality differences in human capital and foreign direct investment

This paper empirically investigates how cross-country differences in the quality of human capital, as they are captured by the conventional measures of international test score differences, influences the patterns of foreign direct investment. Using panel data covering 32 countries during the period between 1985 and 2004, this paper finds that a host country's quality of educational attainment plays an independent role in attracting foreign direct investment. In particular, the quality of human capital influences horizontal foreign direct investment, even after accounting for the roles of skill and factor endowments, trade costs, investment costs, and country-size and income effects.     

China's outward foreign direct investment

China's outward foreign direct investment (FDI) is steadily increasing. The United States is now a key target for China's outward FDI, and the response by the American public tends to fall at opposite ends of the spectrum: fever or fear. Chinese FDI in the United States faces challenges posed by its liability of foreignness in political, cultural, marketing, and technological aspects. Utilizing mini case studies, we herein examine the polarized responses to Chinese outward direct investment, its history, and the challenges faced by Chinese multinational corporations operating in or attempting to enter the U.S. market. Finally, strategy suggestions are proposed.     

Heterogeneous immigrants,exports and foreign direct investment: The role of language skills

We investigate the interplay of language skills and immigrant stocks in determining bilateral FDI outstocks of OECD reporting countries. Applying a Poisson panel estimator to 2004–11 data, we find robust evidence for a positive effect of bilateral immigrants on bilateral FDI‐provided that residents of the two countries have few language skills in common. We find a similar effect for immigrants from third countries that speak the language(s) of the FDI host country, making them potential substitutes for bilateral migrants. Our findings suggest that immigrants facilitate outgoing FDI through their language skills, rather than through other characteristics like cultural familiarity.     

Ethnic ties, location choice, and firm performance in foreign direct investment: A study of Taiwanese business groups FDI in China

This paper examines ethnic ties and their impact on FDI location choice and firm performance. Drawing on social network theory and using data from 88 Taiwanese business groups, the study tests the impact of ethnic ties on firm FDI location choice and performance outcomes in China. Results show that ethnic ties of top managers matter in facilitating firm FDI location choice. In contrast to our expectations however, ethnic ties do not help to improve firm performance in China. Implications of these results are discussed in view of existing literature and future research opportunities are delineated.     

Real options and the theory of foreign direct investment

We extend applications of real options theory to foreign direct investment (FDI) research regarding choice of location and choice of market entry mode under uncertainty. Our study is motivated by the regional configuration of multinational enterprises (MNEs), as well as observed deviations from the stages model in internationalization theory. We shed light on these issues using real option modeling and computer simulations. The results suggest that from the standpoint of pursuing business opportunities and generating real options, building a subsidiary in a nonhome region could be more beneficial than in a home region. However, high option exercise cost may reduce the option value of a nonhome-region location. Our models also imply that choice of entry mode depends on the magnitude (high vs. low) and the type (exogenous vs. endogenous) of uncertainty. When uncertainty is high and endogenous, MNEs may prefer high-commitment entry modes because they contribute to the reduction of uncertainty and provide valuable growth options.     

Trade openness,foreign direct investment,and finance-growth nexus in the Eurozone countries

The paper investigates causal relationships between trade openness, foreign direct investment, financial development, and economic growth in 19 Eurozone countries over the period 1988–2013. Using a panel vector error-correction model (VECM), the empirical results show that these variables are cointegrated. The study shows that a combination of opening the Eurozone countries for trade and fostering their financial and economic development have elevated inflows of foreign direct investment into the region in the long run. At the same time, increasing inflows of foreign direct investment in the short run have propelled economic growth, which in return has strengthened the role of financial development and international trade to sustain economic growth in the region through feedback effects. The empirical results have important policy implications for countries in the Eurozone, especially those who face challenges as a result of lack of confidence in their financial system and those who face a sovereign debt crisis.     

The role of regional formal institutions and foreign direct investment in innovation in Chinese enterprises

China features high degrees of income inequality, regional disparity and regional institutional diversity. With disparities in institutional development across regions, Chinese firms tend to have different levels of innovation as the costs, risks, efficiency and incentives of firms in innovation are affected by the regional institutional building. This article investigates the role of regional formal institutions in the innovation process in Chinese enterprises. It suggests that regional formal institutions (reflected by government support), financial institutions, educational institutions and taxation institutions promote innovation in Chinese firms, while they fail to discover such an impact from legal institutions. Also, regional formal institutions positively moderate Foreign Direct Investment (FDI) spillovers on process innovation.     

Equilibrium coalition structures in the presence of foreign direct investment

This paper incorporates foreign direct investment (FDI) into the examination of trading bloc formation with endogenously determined coalition structures. In so doing, we build a three-country model, in which firms serve foreign markets either by exporting or undertaking FDI, and consider a coalition formation game with the Coalition Proof Nash Equilibrium as an equilibrium concept. We find that the equilibrium coalition structure varies upon firms characterization before and after the formation of a trading bloc. As in the literature, when all firms are exporters in the pre- and post-formation, bilateralism can be an equilibrium outcome. However, when trade barriers are not so high as to be trade-prohibitive and the environment is favorable to multinational activities in the pre- or post-formation, only global free trade will prevail as an equilibrium coalition structure.     

The determinants of China's outward foreign direct investment

Globalisation has led to a rapid increase in the growth of foreign direct investment (FDI) globally. Over the last decade China has become the largest recipient of FDI whilst simultaneously increasing its outward FDI dramatically. The growth in China's outward FDI has attracted little attention from scholars in mainstream research publications. The motivation behind this paper is to investigate the factors driving this growth from both economic and strategic backgrounds. The paper employs panel data analysis covering the period 2003–2009 where we quantify the main drivers of China's outward FDI across a range of variables including bi lateral and multi lateral trade, market size, GDP growth, openness and resource endowment.     

Outward foreign direct investment and domestic innovation performance: Evidence from China

Recent years have witnessed substantial outward foreign direct investment (OFDI) from many emerging economies. Should the governments of these economies encourage OFDI in order to promote domestic innovation? Much OFDI by emerging economy multinational enterprises (EMNEs) has been undertaken to acquire strategic assets overseas, but do these acquisitions bring innovation benefits at home? The empirical analysis presented in this paper considers the effects of OFDI on regional innovation performance, using a panel of Chinese provinces, and finds that OFDI has a very significant impact on domestic innovation. Furthermore, we also identify three contingent factors – absorptive capacity, foreign presence, and the competition intensity of the local market – that moderate the impact of OFDI on innovation performance.     

The relationship between domestic and outward foreign direct investment: The role of industry-specific effects

Previous research has been inconclusive as regards the effect of outward foreign direct investment (FDI) on domestic investments. In this article, we show that this inconclusiveness can be explained at a disaggregated level as a function of the way industries are organized. Based on a simple theoretical framework including monitoring and trade costs, we argue that a complementary relationship can be expected to prevail in vertically integrated industries, whereas a substitutionary relationship can be expected in horizontally organized production. The empirical analysis confirms a significant difference between the two categories of industry as regards the impact of outward FDI on domestic investment. The results may thus have profound policy implications. JEL no. F12, F21, F23, G34.     

The impact of civil war on foreign direct investment flows to developing countries

We investigate the impact of civil war on foreign direct investment (FDI) flows to developing countries. We employ a new data-set that disaggregates FDI inflows to primary, secondary and tertiary sectors. Second, we control for a richer set of economic and institutional variables that could determine FDI inflows including population, gross domestic product (GDP) per capita, the degree of trade openness, exchange rate variability, inflation, the governance structure of the host country using International Country Risk Guide data and its regime type using the POLITY autocracy–democracy data. We also address the reverse causality between FDI and conflict and the potential endogeneity of explanatory variables by employing dynamic system generalised method of moments (GMM) techniques in estimation. Our results indicate that primary sector FDI flows to developing countries are not significantly affected by civil war, whereas secondary and tertiary sectors FDI are more sensitive to such outbreak, potentially leading to reversals of existing FDI. Among institutional variables, government stability and control of corruption are more significant compared to regime type, law and order, and bureaucratic quality.     

Religion and foreign direct investment

This study examines the effect of religion on foreign direct investment (FDI). Using a large sample of directional FDI flows and religious data between 1985 and 2019, we calculate the religious distance between home and host countries and find that FDI flows are smaller for country pairs with greater religious distance. This finding remains intact after a host of variables affecting FDI are controlled. Moreover, the negative effect of religious differences is less pronounced if the host country has higher religious diversity or both countries have a bilateral investment treaty (BIT) in force. Finally, we construct a country-level measure for religiosity and find an asymmetric effect of religiosity on FDI flows. Overall, our study suggests that both religious differences and the level of religiosity play important roles in explaining international FDI flows. (JEL F21, F41, Z12)     

Analysis of government policies,institutions, and inward foreign direct investment: Evidence from sub‐Saharan Africa

This article examines the effects of government policies and institutions on foreign direct investment (FDI) inflows in sub‐Saharan African context using both quantitative and qualitative approaches. On the quantitative approach, we analyzed the effects of institutions on FDI using two statistical techniques—canonical cointegration regression (CCR) and fully modified ordinary least square (FMOLS)—over the period of 1984–2012. We find that political instability, democratic accountability, and investment risk have significant impact on inward FDI in Nigeria. Using a trend analysis, our results provide evidence to suggest that liberal government investment policies have positive influence on FDI inflows. Our qualitative analysis over the 1962–2012 period supports the results of the quantitative analysis.     

Democracy, foreign direct investment and natural resources

Empirical studies that examine the impact of democracy on foreign direct investment (FDI) assume that the relationship between democracy and FDI is the same for resource exporting and non-resource exporting countries. This paper examines whether natural resources in host countries alter this relationship. We estimate a linear dynamic panel-data model using data from 112 developing countries over the period 1982-2007. We find that democracy promotes FDI if and only if the value of the share of minerals and oil in total exports is less than some critical value. We identify 90 countries where an expansion of democracy may enhance FDI and 22 countries where an increase in democratization may reduce FDI. We also find that the effect of democracy on FDI depends on the size and not the type of natural resources.     

New exports matter: Discoveries,foreign direct investment and growth,an empirical assessment for Middle East and North African countries

Export diversification has become a priority goal for the development of the Middle East and North African (MENA) countries. In this article, we aim at measuring both the effects of exports' diversification on growth in MENA countries and the way new exports and foreign direct investment (FDI) interact with each others in the process of growth. Although the effects of FDI on growth have been scrutinized by numerous studies up to now, the effects of diversification and discoveries in export have only very recently been assessed. But no one has made explicit the way FDI and export discoveries interact in the growth process. A model is estimated by the system-generalized method of moments and we provide robust evidence that export discovery and FDI stimulate gross domestic product (GDP) growth in our sample of countries, and that FDI does not necessarily have the same effect on growth according to the level of discovery of the country. We also show that the joint positive effect of new exports and of imports suggest that technological spillover from import but also from the integration to global value chains are likely to occur in our sample of countries.