The Effect Of Cultural Distance On Chinese Firms' Outward Foreign Direct Investment

As the scale of foreign direct investment of Chinese firms continues to expand and the country of investment continues to extend,it is inevitable to face the economic and cultural environment of different countries in the process of overseas operations.When investing abroad,cultural factors have become an important source of risk that cannot be ignored.If the multinational corporation neglects the cultural distance,it is likely to cause cultural conflicts,lead to loss and even withdrawal from the host country market.As Chinese foreign direct investment enters the stage of rational adjustment,it is of great practical significance to study the effect of cultural distance on Chinese firms' foreign direct investment.Based on the analysis of the history,status quo and characteristics of Chinese firms' outward foreign direct investment,the five cultural dimensions in Hofstede's cultural dimension theory are selected to analyze the possible impact on Chinese foreign direct investment.The results show that Chinese enterprises are willing to invest in countries and regions with small cultural distances in order to reduce the cultural adaptation costs.Based on this,this thesis selects the panel data of 52 countries(regions)of Chinese foreign direct investment between 2009 to 2017,and empirically studies the impact of cultural distance on Chinese firms' foreign direct investment.As a whole variable,the cultural distance between the host country(region)and China significantly hinders Chinese foreign direct investment.As a sub-dimensional variable,the cultural distance between the power distance and the uncertainty avoidance dimension is negatively correlated with Chinese firms' foreign direct investment,which indicates that Chinese enterprises tend to invest in countries with high power distance and low uncertainty aversion similar to China.Finally,from the perspective of multinational corporation and the government,this thesis puts forward relevant suggestions for better promoting overseas investment activities of Chinese enterprises.