The Impact Of Cultural Distance On The Efficiency Of China’s Foreign Direct Investment

Since the "going global" strategy was put forward,the scale of China’s outward direct investment has grown rapidly and its investment cooperation with other countries has been steadily promoted.The complexity of the international investment climate confronting Chinese businesses is escalating due to the continual growth of investment scope,the continual enlargement of industries involved,and the ever-changing geographic spread.Among them,the influence of cultural distance is more and more prominent.The differences between different countries or regions in historical development,religious belief,customs,language and culture affect the cost of OFDI,increase the uncertainty of OFDI,and attract the wide attention of scholars.However,the impact of cultural distance on the efficiency of China’s OFDI has not yet been developed in the academic community.Therefore,studying the impact of cultural distance on the efficiency of China’s OFDI has important theoretical and practical significance for Chinese enterprises to avoid the risks brought by cultural distance in time and promote the further improvement of the efficiency of foreign direct investment in the process of "going out".Based on China’s outward FDI data from 2008 to 2018,this thesis uses stochastic frontier analysis to study the impact of cultural distance on China’s OFDI efficiency and the moderating effect of education on students studying in China.First,this thesis initially gauges the cultural disparity between China and other host nations,as well as the efficacy of China’s foreign direct investment.It is found that the cultural distance between China and developing countries is small,while that between China and developed countries is large.There is still much room for improvement in the efficiency of China’s outward direct investment as a whole,and the efficiency of outward direct investment varies greatly among countries.Targeted solutions are needed for countries that invest in efficiency.Secondly,this thesis adopts stochastic frontier model,takes cultural distance as explanatory variable,geographical distance,GDP per capita and total labor force as control variables,empirically tests how cultural distance affects the efficiency of China’s OFDI through stochastic frontier analysis and technological inefficiency model,and adds the scale of international students to the econometric model as a regulating variable.To study the moderating effect of the number of students studying in China on the relationship between cultural distance and the efficiency of China’s OFDI.Results: Cultural distance inhibits the efficiency of China’s OFDI.Meanwhile,education in China will weaken the inhibitory effect of cultural distance on the efficiency of China’s foreign direct investment,and weaken the negative relationship between cultural distance and the efficiency of China’s foreign direct investment.Replacing the stock of China’s FDI flow and six dimensions of cultural distance with four,empirical research is further tested.The results show that the empirical results are robust.At the same time,the heterogeneity analysis of "Belt and Road" countries and non-" Belt and Road " countries shows that the regression results are basically consistent.Based on the above analysis,finally,feasible policy recommendations for improving the efficiency of China’s outward FDI are proposed at the government and enterprise levels.