Geopolitical Risk, Social Resilience and Corporate Foreign Direct Investment

Abstract

In the current turbulent global political environment, it is of great theoretical value and practical significance to empirically test the impact of geopolitical risk on Chinese enterprises' foreign direct investment (FDI) and the role of host country's social resilience in it. Using the data of foreign direct investment of Chinese listed companies from 2000 to 2022, this paper explores the impact of geopolitical risk of host country on foreign direct investment of enterprises, and examines the role of social resilience of host country in it. The test results show that: 1) geopolitical risk hinders Chinese enterprises' OFDI. 2) The social resilience of host countries can significantly reduce the negative impact of geopolitical risks on Chinese enterprises' FDI, and the moderating effect of social resilience in developing economies is more obvious than that in developed economies. 3) The impact of geopolitical risk on information technology, agriculture, forestry, animal husbandry and fishery, manufacturing, construction and mining is significantly negative, while the impact of scientific research, leasing business and other industries on geopolitical risk is significantly positive. 4) The impact of geopolitical risk on greenfield investment enterprises is significantly negative, and the impact on cross-border M&A enterprises is significantly positive. Firms with high financial constraints are more sensitive to geopolitical risks than firms with low financial constraints. The research conclusions of this paper provide important theoretical and empirical support for Chinese enterprises to cope with geopolitical risks and optimize the layout of OFDI.

Keywords: geopolitical risk, Foreign direct investment, Social resilience