The Research On The Influence Of Institutional Distance And Cultural Export On China’s Foreign Direct Investment

Since the "going out" initiative,the speed and quality of China’s foreign direct investment have been continuously improved.However,due to the late start of China’s foreign investment,there is still a certain distance compared with developed countries.When enterprises conduct foreign investment activities,they often face various risks,which increases the cost of foreign investment and hinders the foreign investment activities of enterprises.Therefore,some literatures analyze the influencing factors of corporate foreign direct investment from the aspects of enterprise heterogeneity,market openness of host country,resource endowment,technology and infrastructure.In addition,the imperfect institutional environment and the existence of institutional distances make enterprises’foreign investment face risks in economic,political,legal and cultural conflicts.Effective institutional arrangements can reduce transaction costs.Therefore,this paper analyzes the impact of institutional distance and cultural output on China’s foreign direct investment through a combination of theory and empirical methods.On the basis of combing relevant literatures at home and abroad,this paper theoretically analyzes the influence of institutional distance and cultural output on China’s OFDI,and proposes relevant assumptions.Firstly,the institutional distance is negatively related to China’s foreign direct investment.Secondly,China’s foreign direct investment tends to choose countries with a larger institutional distance and a relatively negative institutional distance.Thirdly,the establishment of the Confucius Institute is conducive to the development of China’s foreign direct investment.Finally,the establishment of the Confucius Institute has a certain remedial effect on institutional distance.Then,the panel data from 2004 to 2016 were selected,and the institutional distance and the number of Confucius Institutes were taken as the core explanatory variables.The investment gravity model was used to conduct empirical analysis.Firstly,this paper uses stepwise regression method and 2SLS to perform regression analysis on the whole sample.Secondly,according to the direction of the institutional distance,we divide the sample to test the similarities and differences between the positive institutional distance and the negative institutional distance.Thirdly,according to the country category,we divide the sample into the developed countries and developing countries.Based on the above regression,the paper draws relevant conclusions.Firstly,the establishment of the Confucius Institute has a significant role in promoting China’s foreign direct investment.The Confucius Institute reduces the transaction cost by reducing cultural differences and increasing the cultural identity,thus promoting the development of China’s foreign direct investment.Secondly,institutional distance has a significant impediment to China’s foreign direct investment.The greater the institutional distance,the greater the uncertainty and risk of foreign direct investment,which leads to an increase in transaction costs and hinders the development of foreign direct investment.Thirdly,China’s foreign direct investment tends to choose a country with a positive institutional distance and a negative institutional distance,that is,the "asymmetry" of the formal institutional distance hindering China’s foreign direct investment.Fourthly,the Confucius Institute can substitute for the institutional barrier to China’s foreign direct investment.Fifthly,the Confucius Institute’s compensation effect on institutional distance varies with investment location.For the host countries and developed countries whose institutional quality is better than that of China,the good institutional arrangements of the host country have provided a good role for China’s foreign direct investment,and the role of the Confucius Institute is relatively small.For host countries and developing countries whose institutional quality is lower than that of China,the Confucius Institute provides effective "initiative" extra security protection from the home country,which makes up for the lack of the host country’s institutional environment and reduces the low institutional environment caused by the host country.Uncertainty and risk have promoted China’s development of foreign direct investment in host countries.At the end of the article,we attempt to give relevant suggestions.Firstly,strengthen the construction of relevant domestic institutional quality and shorten the institutional distance from host countries with high institutional quality.Secondly,effectively integrate the resources of cultural output and explore the rational construction of the Confucius Institute’s development scale in the host country.Thirdly,give full play to the replenishment effect of cultural output on institutional distance,integrate cultural resources,avoid institutional risks,and reduce the cost of transnational operations.