| Outward Foreign Direct Investment (OFDI) is regarded as an important carrier and representation for the open economy development of a country or region. China, as a large developing country, has some different characteristics for outward foreign direct investment comparing with developed countries. Especially, with reformation feature and large country advantages, it may become the important basis for Chinese outward investment. At present, most of researches are based on classical multinational companies' examples and classical FDI theory to explain China OFDI flow reason.However,Those studies which based on investment theories of multinational companies in developed countries still need supplementations and further improvement to explain Chinese companies, outward investment activities. (Mock et al, 2008; Pei Changhong and Zheng Wen,2011). As the influence from system towards international trade and national direct investment is arisen gradually, study on system becomes an essential perspective for OFDI research, while more and more scholars regard system as a key element to know about the differences among enterprises' OFDI activities in developing countries (especially China) (Dunning, 2004; Morck et al, 2008; Peng et al, 2008;Meyer et al, 2001). Therefore, it is significant to make re-assessment of China OFDI under a brand-new perspective. It is worthwhile to think further about what institutional environment of home country and home country feature will impact on China OFDI, its mechanism and effect, and so on.Based on above-mentioned research background, the main characteristics of China marketing transformation and OFDI classical features are explored in this paper. On the basis of classical OFDI theory, new marketing economies' OFDI theory and institutional economic theory, the theoretical frame of marketing transformation and OFDI by adopting the panel data of China's provinces is constructed to verify this hypothesis. In addition, solid verification and case analysis are also provided. This paper includes the six following structures:(1) Classical OFDI as well as emerging economies' OFDI have provided important theoretical basis to explain the outward investment activities of China, which however,still need further improvement and enrichment. The institutional element, especially the marketing transformation in home County, has very important effect in building the OFDI activities of China. As China multinational investment enterprises have some features e.g. national specific advantages, and etc. it turns out some investment activities and characteristics which cannot be explained by traditional classical theory, and needs to re-assess China OFDI under a new perspective. Not only the institutional element will directly influence enterprises internationalization strategy, but also it may generate impact on enterprises internationalization effect. As China has large country features and home country special advantages, (Rugman and Li, 2007; Sun et al, 2010; Pei Changhong and Fan Ying,2010; Pei Changhong and Zheng Wen,2011), institutional environmental element of home country will have great impact on understanding dynamic interaction between China OFDI enterprises and its belonged institutional environment. (Dunning .and Lundan, 2008;Yamakawa, Peng and Deeds, 2008 ).(2)Based on the institutional environment in which China is transferred from.planned economy to market economy, the author discussed about the influence towards China OFDI motivation and activities from two important factors e.g. market segmentation and marketization process, which has established a comprehensive analytical framework. According to the research, first of all, regional market segmentation decreases allocation efficiency for internal regional capital, labour and other resources, while it increases enterprises' operating cost and decreases organization efficiency and micro-economic efficiency. Furthermore, it weakens regional industrial competitiveness, which finally causes enterprises' competiveness decreased and will generate negative impact on oversea investment of enterprises. Secondly,market-oriented reform is the driving force for improving regional economic growth.Through improvement of resources allocation efficiency,it increases total-factor productivity level and improves economic growth (Fan Gang, 2011 ), and it brings more development opportunities for micro-enterprise and upgrades productivity ratio, which guarantee the enterprises with stronger OFDI ability.(3) Starting from China's unique regionally segmented market institutional environment, the mechanism of impact of market segmentation on enterprises'competitiveness of technique and management is innovatively discussed from the aspects of market mechanism, efficiency of resource allocation and industrial competitiveness. Based on the discussion, the specific mechanism by which OFDI is influenced by market segmentation is introduced. In this paper, the panel data of China's provinces between 2003 and 2010 is analysed in econometric methods of fixed effect,random effect and dynamical panel generalized method of moments estimation to test the mechanism of market segmentation's suppression on the OFDI. The test results confirm the theoretical perspective that market segmentation will reduce the efficiency of resource allocation, harm the competitiveness of enterprises, and decrease OFDI capacity of local enterprises. In another word, the higher the level of market segmentation is, the lower OFDI capacity is on average. The test results show that the regional OFDI level is significantly reduced by the market segmentation when the other factors impacting OFDI are controlled. In addition, long-term cumulative effect also obviously exits in the suppression. It can be concluded' that the market institutional environment (market segmentation) of home country has a significant impact on the overseas investment of enterprises, which is not heeded in classical theory of multinational corporations but is very important for emerging market countries, such as China.(4) Starting from the institutional environment of marketization of home country,the mechanism of impact of marketization on OFDI is innovatively concluded from the discussion of the aspects that can increase the enterprise productivity and competitiveness: factor mobility impacted by marketization, development of non-public enterprises,deregulation and weakening administrative barriers. In this paper,the panel data of China's provinces between 2003 and 2010 is analysed in econometric methods of fixed effect, random effect and dynamical panel generalized method of moments estimation to test the mechanism of marketization's promotion on the OFDI. The test result confirms the theoretical perspective that marketization can enhance the efficiency of resource allocation, improve the competitiveness of enterprises, and increase OFDI capacity of local enterprises. It means that the higher the level of marketization is, the stronger OFDI capacity is on average. The test results show that the regional OFDI level is significantly increased by the marketization when the other factors impacting OFDI are fixed. Furthermore, long-term cumulative effect also obviously exits in the enhancement. The importance of home country's institutional environment for OFDI of enterprise is confirmed from the discussion of another aspect of China's situation.(5) According to analysis based on the typical cases of Zhejiang Province: as the developed province in eastern region, Zhejiang has a well-developed market in general.By taking the lead in the market-oriented reformation and promoting market-oriented operation mechanism, Zhejiang province has mature product market and factor market,especially the larger scale and faster growth in the field of outward foreign direct investment. Compared with the middle and western region, Zhejiang has higher level of marketization and lower level of market segmentation, which fosters the competitiveness of local enterprises by using the economies of scale of the local market effectively. Local enterprises, formed by private enterprises as the main body, continue to implement foreign investment in market development, and gradually form the opening up system with Zhejiang characteristics. Therefore, the market mechanism as well as mature factor and production-oriented market system, which formed by the market-oriented transformation of Zhejiang province, has promoted cross border investments mainly by private enterprises in Zhejiang. The market transformation and OFDI activities by enterprises have formed a benign interaction.(6) Based on the theoretical analysis and practical research results,this paper puts forward policy recommendations in the aspect of improving the institutional environment and promoting OFDI by optimization of policies in order to boost the positive interaction and coordination between institutional environment and the OFDI.Based on the special background of market transformation of China, this paper studies the specific influence of market reformation to OFDI. This study has very import practical significance in scientific and rational examination of the internal reform and opening-up policy (OFDI) and their interaction mechanism, as well as objective understanding and improving the existing system of soft environment. This study would promote more Chinese enterprises to go global and invest abroad better. At the same time, from the theoretical perspective, this paper can form a satisfied verification and supplement to the study of "Institution-based View for cross border investment theory"and emerging economies' theory of multinational corporation (EMMCs), so as to promote and expand the relative research on institution and OFDI. The study would also help to enrich and deepen the understanding of investment motivation of multinational corporations in developing countries by providing practical evidence of outward foreign direct investment from emerging economies (China) and multinational corporations(EMNCs). |
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