The Effects of Institutional Difference and Resource Seeking Intent on Location Choice of Chinese Outward FDI
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Date
2018-04-13
Open Access Location
Journal Title
Journal ISSN
Volume Title
Publisher
Scientific Research Publishing Inc
Rights
Copyright © 2018 by authors and
Scientific Research Publishing Inc.
This work is licensed under the Creative
Commons Attribution International
License (CC BY 4.0).
Abstract
This study seeks to explain how differences in political risk and economic freedom between host and home countries interact with investing firms’ resource-seeking intent to influence the firms’ outward foreign direct investment (FDI) location choice. Using panel data covering Chinese outward FDI in 62 host countries during the period of 2003-2014, we performed panel data regression analysis. The results show that when firms’ resource seeking intention is high, the FDI location choice is negatively associated with the differences in political risk, but positively associated with the differences in economic freedom between China and the host countries. The results also show that there is a substituting effect between political risk and economic freedom in their interactions with resource-seeking intent to influence FDI location choice. The findings suggest that the Chinese firms’ outward FDI location choice is a result of the interplay and the fit between the firms’ external legitimacy in the host countries and the firms’ internal legitimacy within the multinational organization.
Description
Keywords
FDI Location Choice, Resource Seeking Intent, Political Risk, Economic Freedom, Chinese Outward FDI
Citation
Theoretical Economics Letters, 2018, April 2018, 8 (5), pp. 981 - 1003