Impact of cultural trade on foreign direct investment: Evidence from China |
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| Institution: | 1. School of Economics, East China Normal University, Shanghai, China;2. School of Economics and management, Wuhan University, Wuhan, China;3. State Grid Fujian Electric Power Co. Ltd., Fujian 350003, China;1. School of Economics and Management, Shanxi University, 92 Wucheng Road, Taiyuan, Shanxi 030006, China;2. Asper School of Business, University of Manitoba, Winnipeg, Manitoba, Canada;1. School of Business, Beijing Technology and Business University, Beijing, China;2. School of Economics and Management, Beijing University of Posts and Telecommunications, Beijing, China;1. Monetary and Banking Research Institute, Tehran, Iran;2. Graduate School of Management and Economics, Sharif University of Technology, Tehran, Iran;3. Department of Finance, Orfalea College of Business, California Polytechnic State University, San Luis Obispo, CA 93407, USA;1. Department of Finance, College of Business, National Pingtung University, Taiwan;2. Department of Finance, College of Business, Chung Yuan Christian University, Taiwan;1. Institute of Economic Research, Hitotsubashi University, Tokyo, Japan;2. Faculty of Economics, Hosei University, Tokyo, Japan;3. Institute of Economic Research, Kyoto University, Kyoto, Japan;1. School of Management, Zhejiang University of Technology, Hangzhou 310012, PR China;2. School of Business and Information Technology, Missouri University of Science and Technology, Rolla, MO 65409, United States of America |
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| Abstract: | Value of cultural goods varies across consumers with different backgrounds. Exchange of cultural goods may lead to better mutual understand and trust, which helps mitigate the entry obstacles in the investment targets. This paper studies how cultural trade affects Chinese firms' outbound foreign direct investment (OFDI). We find that both likelihood and total volume that a firm invests in a foreign country increase with the amount of bilateral cultural trade. We further show that cultural trade boosts the success rate of OFDI projects. These effects are intensified in targets with weaker institutional quality or a great cultural distance to China. |
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