What is it about?
In order to examine the impact of cultural and institutional distance on China’s OFDI towards the One Belt, One Road (OBOR) area, the paper selects 28 countries along The Belt and Road. The empirical results using panel data from 2006–2014 indicate that institutional distance is negatively correlated with China’s outward foreign direct investment (OFDI). At the same time, cultural distance interacts with bilateral trade, resulting in a “benefit of foreignness” effect.
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Why is it important?
We focus on how culture and institutions affect Chinese firms’ location choice of investment along the Belt and Road region. Our paper contributes to a growing literature that analyses the determinants of Chinese outward foreign direct investment by selecting 28 OBOR countries between 2006 and 2014.
Perspectives
The policy implications of our findings are that to facilitate the cooperation mechanisms for the Belt and Road initiative, we should pay more attention to institutional differences among countries. Especially for transition and developing economies as FDI recipients, the governments should focus on strengthening economic institutions in attracting FDI.
Catherine ZHANG
Shanghai University of International Business and Economics
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This page is a summary of: How Do Cultural and Institutional Distance Affect China’s OFDI towards the OBOR Countries?, Baltic Journal of European Studies, January 2017, De Gruyter,
DOI: 10.1515/bjes-2017-0003.
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