Research On The Influence Of Institutional Factors On Foreign Direct Investment Of Chinese Enterprises

With the "One Belt and One Road" strategy,more and more Chinese companies are making direct foreign investments.However,the overseas market environment is complex.Political,economic,legal systems in host country are different.Political barriers,trade barriers,tariff barriers,will definitely affect the overseas development of Chinese-funded enterprises.By combing the classical theories of foreign investment and the theories of foreign direct investment in developing countries,we found that the classic theories of foreign direct investment in developed countries failed to fully explain the OFDI phenomena in emerging economies.Therefore,it is of great realistic and theoretical significance to study the influence of institutional factors on the direct foreign investment of Chinese companies.In this paper,we studied the foreign direct investment of Chinese companies that influence the success from the perspective of the home country institutional and the host country institutional factors by using the 2,574 case studies of Chinese enterprises' outward foreign direct investment in the China Global Fund for Investment(CGIT)database from 2005 to 2016 as research samples and excludes Bermuda,Cayman Islands,and British Virgin Islands and United States Virgin Islands,combined with the relevant sample data of the UNCTAD database and the World Bank database from 2005 to 2016.Among them,the samples of "blocked" foreign direct investment by Chinese companies mean unfinished investments or completion of foreign direct investment but failed eventually from 2005 to 2016.The samples of "successful" foreign direct investment of Chinese enterprises mainly include investment that are operating successfully.Through the descriptive analysis and regression analysis with probit model from the institutional perspective,we found that the home country institutional factors and the host country institutional factors both affect the Chinese company OFDI.Among all the institutional factors,financing environment and policy support in home country,the government effectiveness and law level of host country have a significant impact on the probability of success of Chinese enterprises' outward foreign direct investment.Also,companies with small investment amount invest in country which is a member of the WTO achieve success easier.Law effectiveness and government effectiveness in home country and factors whether China and host countries sign bilateral investment treaties,and the avoidance of double taxation treaties have no significant effect on the probability of success of Chinese enterprises' outward direct investment.This paper examines the influence of institutional factors on the probability of Chinese enterprises' outward foreign direct investment success from the microscopic perspective and makes the following recommendations based on the research results.First,the home country government should improve domestic OFDI incentive policies and provide a sound OFDI financing system.Second,foreign direct investment enterprises need to fully understand the obstacles of the host country institutional system and scientifically select OFDI investors.Third,the host country needs to increase the level of government effectiveness and law effectiveness in order to attract more foreign companies' overseas investment and promote the development of economic globalization.