Research On The Impact Of Institutional Distance And Investment Motivation On China's Foreign Direct Investment

In the context of the international economic tide,capital activities have long broken the national borders of factor flows,and foreign direct investment activities are active on the world stage.Since joining the WTO in 2001,China has actively pursued the “going out”strategy.In 2013,under the guidance of the concept of cooperation and win-win,it proposed and implemented the “One Belt,One Road” strategic cooperation initiative,and tried to share,share and build together.However,China's direct investment in countries along the “Belt and Road” accounts for a small proportion of China's direct foreign direct investment.The investment industry is mostly concentrated in traditional industries such as resource extraction and infrastructure construction.The institutional distance is an important reason for the current status of this investment.However,according to previous studies,the institutional distance does not necessarily negatively affect foreign direct investment,but also comprehensively examines the relative merits of the quality of the home country and the host country system and the investment motive of the home country.Therefore,this paper uses the data from 2006 to 2016 in 52 countries along the “Belt and Road” as a research sample.Considering the omissions caused by the use of institutional data of different dimensions in most studies,this paper uses the World Bank's Global Governance Index(WGI),including Political stability,corruption,democratic rights,government efficiency,degree of rule of law,and quality of supervision are measured in formal systems;Hofstede's four-dimensional cultural scores are used to measure informal institutions,trade gravitational models are extended,and panel regression empirical test system distances are used.The impact of China's direct investment in countries along the route and the impact of different investment motives on the foreign direct investment effect of institutional distance.The following conclusions are drawn:First,the institutional distance significantly affects China's direct investment in countries along the “Belt and Road”.Regardless of whether it is from a formal institutional distance or from an informal institutional distance,the institutional distance weakens China's direct investment in countries along the route;Second,further examine the direction of institutional distance and find that when the institutional quality of the host country is inferior to that of the home country,that is,the direction of the system is positive,the more China invests in the countries along the “Belt andRoad”,showing the institutional preference characteristics;When the quality of the host country's system is better than that of the home country,that is,when the institutional distance is negative,China's investment in countries along the “Belt and Road” is less,showing the institutional proximity characteristics.The research samples were divided into “one belt”countries and “one road” countries,and it was found that the “one road” countries were in line with the former relationship,and the “one belt” countries were in line with the latter relationship;Third,because investment motives have “heterogeneous preferences” for institutional distances in different directions,the sensitivity of investment behaviors based on different investment motives to institutional distances is different.This paper divides investment motives into market seeking,natural resource seeking,and strategic asset seeking.After empirical test,it is found that when the quality of the host country's system is inferior to that of the home country,that is,the direction of the system is positive,the market seeking type and the strategic asset seeking type are not sensitive to the positive institutional distance.Therefore,the positive institutional distance does not significantly affect the investment behavior choice under the investment motive,while the natural resource seeking type shows the characteristics of the positive institutional distance.Therefore,foreign direct investment for natural resource seeking type will choose countries along the way with positive institutional distance.When the quality of the system of the host country is better than that of the home country,that is,when the institutional distance is negative,the market seeking type and the strategic asset seeking type show the preference for the negative institutional distance,then the foreign direct investment out of these two investment motives tends to choose the countries with a negative distance to the system are larger.The natural resource seeking type shows the close proximity of the negative institutional system,and the foreign direct investment under the investment motive tends to choose countries along the negative institutional distance.According to the above research conclusions,this paper proposes that China's direct investment in countries along the “Belt and Road” should choose a host country with a formal and informal system close to reduce unnecessary transaction risks and costs;Chinese companies should analyze the sensitivity of such investments to the distance of the host country system in light of their own investment types.Be cautious to “go out”.