An Empirical Research Of The Relationship Between Political Risk Of The Host Country And OFDI Performance

Foreign direct investment is one of the important factors which driving the growth of the world economy,which is conducive to the internationalization of countries.Foreign direct investment involves the location choice of MNEs(multinational enterprises),and MNEs need to consider political risk of the host country.However,investment barriers,resource acquisition and transaction costs of MNEs are affected by political risk of the host country.Therefore,studying the impact of political risk of the host country on the performance of foreign direct investment of MNEs is of great significance to the location choice of MNEs.This paper analyzes the relationship between political risk of the host country and OFDI performance from the perspective of traditional political risk theory.First of all,this paper attempts to construct the theoretical model of the relationship between political risk of the host country and OFDI performance.In addition,based on the perspective of resource dependence theory,this paper proposes the adjustment effect of bargaining power on the relationship between political risk of the host country and OFDI performance.And this paper puts forward the relevant research hypotheses based on these theories.Then,this paper identifies the sample screening criteria and data sources,and also collects and sorts out relevant data on Chinese MNEs’ foreign direct investment events from 2003 to 2014.And then,the regression analysis of the cross-sectional data of 610 Chinese MNEs’ foreign direct investment events from 2003 to 2014 is made by using stata 12.1 to validate the hypotheses.Finally,this research combines with the regression results to analyze the relationships among variables and draws conclusions.The results of this study show:(1)The political risk of the host country has a negative impact on OFDI performance;(2)MNEs with low investment ratios-low cross-border indices have the weakest bargaining power and can strengthen the negative impact of political risk of the host country on OFDI performance;(3)MNEs that are "stuck in the middle",that is,MNEs with low investment ratios-high cross-border indices,which compared with MNEs with the weakest bargaining power,the negative impact of weakening political risk of the host country on OFDI performance is more significant.This study innovatively divides enterprises into four types.The study shows that MNEs with low investment ratios-low cross-border indices and MNEs with low investment ratios-high cross-border indices should evade access to the host country with high political risk.This provides reference for MNEs to choose location to improve their performance.