TITLE:
China’s ODI Motivations, Political Risk, Institutional Distance and Location Choice
AUTHORS:
Jing Han, Xiaoyuan Chu, Ke Li
KEYWORDS:
Outward Foreign Direct Investment, Location Choice, Investment Motivation, Political Risk, Institutional Distance
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.7,
August
5,
2014
ABSTRACT:
Utilizing an outward foreign
direct investment (ODI) data sample of 48 countries and districts from the year
2003 to 2010, and based on institutional distance theory, a resource-based
view, an institutional-based view and political risk management theory, this
paper applies multiple regression equations to explore the linkages between
China’s ODI motivations, political risk, institutional distance and location
choice. We obtain the following conclusions: 1) there are three different
motivations affecting China’s ODI location choice, namely, resource-seeking,
strategic asset-seeking and market-seeking motivations; 2) generally, China’s
multinational enterprises are inclined to invest ODI in countries with high
political risk and short institutional distance; and 3) multinational
enterprises with different ODI motivations have diverse location choices. For resource-seeking
foreign investment, Chinese multinational enterprises tend to invest in
countries with high political risk and short institutional distance. For
strategic asset-seeking foreign investment, Chinese multinational enterprises
tend to avoid countries with high political risk and short institutional
distance. For market-seeking foreign investment, multinational enterprises of
China tend to avoid countries with high political risk and short institutional
distance.