The Effect Of Host Countries’ Intellectual Property Protection On The Location Choice Of China’s OFDI

Along with the development of global economic integration, the government of China is encouraging and supporting capable enterprises to invest abroad. In nearly a decade, China’s OFDI achieved unprecedented development. China’s OFDI exceeded 100 billion dollars in 2013 and China has been the third largest invest country for two consecutive years. However, the investment performances of the multinational enterprises were not very ideal. The mainly reason of this is that when choosing location of OFDI, Chinese enterprises paid too much attention to the traditional factors such as resources, labor force and markets, ignoring the institutional environment of the host country (especially the protection of intellectual property rights). At present, the protection of intellectual property rights has become more important and good protection of intellectual property rights contributes not only to the innovation and spread of technology, but also to the location choice, the entering way, the market localization and the structure of enterprise investment. Through the perspective of institutional economics, this article concentrates on how the intellectual property protection of the host country affects OFDI behavior of China. And it uses the relevant data of 105 host countries from 2007 to 2013, based on the threshold effect of the multinational panel, studying the effect of the intellectual property protection level of the host country on China’s OFDI location choice.After reading and summarizing many existing relevant theories and literatures, this paper firstly analyzed the current situation, characteristics and existing problems of China’s OFDI location choice, and described the institutional environment of the host country; secondly, from the theoretical level, we discussed the mechanism that how host countrys’ intellectual property protection affects China’s OFDI behaviors, which provided a theoretical basis for setting the model and interpreting the results; Finally, we carried on the empirical test for the topic, that is, respectively using host countrys’ per capita GDP and China’s OFDI stock of the host country as threshold variable to implement multinational panel data regression analysis, to measure the effect of host countrys’intellectual property protection on the destination and motivation of China’s OFDI location choice. The results of empirical test showed that China’s OFDI prefers countries with good protection of intellectual property rights, in order to get better play of the ownership advantage of enterprises and to reduce the risk of imitation and leak. For developing countries with poor protection of intellectual property rights, their rich energy resources endowment which still has great appeal to China’s OFDI can fully make up for the deficiency. However, for countries with too harsh protection of intellectual property rights, Chinese enterprises have difficulty in entering the markets and getting technology, therefore, Chinese enterprises have to reduce the investment in these countries.Based on the above theory and the empirical analysis, this paper put forward relevant suggestions from the government level and enterprise level, in order to guide Chinese multinational companies to fully understand the institutional environment of the host country, especially the protection of intellectual property rights, and then make choice of OFDI location more wisely.