Institutional Analysis and the Determinants of Chinese Outward FDI
Multinational Business Review, Vol. 18, No. 3, 2010
Posted: 3 Mar 2010 Last revised: 22 Jan 2011
Date Written: March 1, 2010
In the last two decades, China has registered rapid and substantial increases in outbound foreign direct investment across regions and industries. Building on prior literature, this paper provides an empirical analysis on the impact of the Chinese institutional environment on its globalization patterns. A framework is presented through which distortive government policies act upon existing country and firm specific advantages, giving rise to institutional specific (dis)advantages. The applicability of this framework is then tested empirically through a unrestricted regression model that controls for the standard explanatory factors of inter-country FDI in comparing state and private sector OFDI determinants. This study concludes that institutional discrimination creates relative advantages for state-owned firms at a cost to private enterprise, leading to divergences in IB strategies.
Keywords: China, Outward FDI, Instituions, SOE
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