The Impact Of Host Countries’ Economic Freedom On The Performance Of Chinese OFDI Enterprises

Since "the Belt and Road" was put forward in 2013,the volume of China’s direct investment in countries along "the Belt and Road" has continued to expand.According to the 2021 Statistical Bulletin of China’s Foreign Direct Investment,China’s direct investment in countries along "the Belt and Road" reached 2 4.15 billion dollars in 2021.Countries along "the Belt and Road" are increasingly important investment destinations for Chinese enterprises.However,the increase of investment volume does not necessarily mean the improvement of investment quality.As the main body of OFDI and an important part of the "going out" strategy,the survival and development of multinational enterprises in the host countries are always constrained by the local investment environment.Once the subsidiaries operate poorly overseas,they will withdraw from the host countries’ market,which will affect the performance of the parent companies of OFDI enterprises.Enterprise performance is an important indicator that affects OFDI enterprises’ overseas investment decisions and location choices.With the accelerating pace of Chinese enterprises’ "going global",it is particularly important to study how the overall investment environment of the host countries affects OFDI enterprises’ performance.However,due to the different economic levels of countries along "the Belt and Road",the investment environment among countries is obviously different.The evaluation dimension of the investment environment is relatively diverse.Generally speaking,it should not only include the "physical environment" such as infrastructure construction and labor market,but also include the "humanity environment" such as market business environment,financial service system and institutional level.The degree of economic freedom originally refers to all rights and freedoms related to the production,distribution and consumption of products and services.The view of the American Heritage Foundation is that countries or regions with higher economic freedom will have higher economic growth and prosperity than those with lower economic freedom.Therefore,this paper believes that countries or regions with higher economic freedom will also have a more friendly investment environment,which will have a differential impact on the performance of OFDI enterprises.This paper first selects the economic freedom index(EFI)disclosed by the American Heritage Foundation as the proxy variable of the investment environment,clarifies the mechanism of the impact of economic freedom on the performance of OFDI enterprises by combing the existing research theories.It is found that the level of economic freedom of countries along "the Belt and Road" is low and uneven,with a large room for improving.Secondly,this paper takes the unbalanced panel data of Chinese OFDI enterprises from 2006 to 2021 as the research sample,and uses the fixed effects model to test the impact of the host countries’ economic freedom on the performance of OFDI enterprises.The research shows that the high economic freedom of countries along "the Belt and Road" has a significant role in promoting the performance of OFDI enterprises,and uses the World Bank’s Worldwide Governance Indicators(WGI),the score of economic freedom obtained by comprehensive calculation using entropy method(Score)to test the robustness of the model.Thirdly,this paper selects the Intellectual Property Index(Property)released by the World Economic Forum to complete the channel test.It shows that the degree of intellectual property protection is,to a certain extent,the channel through which the degree of economic freedom plays a role in the impact mechanism of the host countries’ economic freedom on the performance of OFDI enterprises.Fourthly,this paper conducts a sub sample test on enterprise heterogeneity from three perspectives:before and after "the Belt and Road" initiative,the industry of OFDI enterprises,the ownership of OFDI enterprises.It is found that since "the Belt and Road" was proposed in 2013,the high degree of economic freedom of the countries has significantly improved the performance of OFDI enterprises;What’s more,OFDI enterprises in the secondary industry have a more obvious effect on enterprise performance when they make outward direct investment;In addition,OFDI enterprises with non-private ownership are more significantly affected by the high economic freedom of the host countries due to their better resource endowment advantages,stronger anti-risk ability,higher supervision and decision-making power.Finally,based on the results of theoretical analysis and empirical tests,this paper puts forward targeted countermeasures and suggestions for how to effectively and evenly improve the level of economic freedom of countries along "the Belt and Road" and how different types of OFDI enterprises make overseas investment decisions and location choices according to their own characteristics.As for the innovation of this paper,first,the overall research perspective is relatively new.Under the background of the vigorous promotion of "the Belt and Road" construction,the investment environment of the host countries(economic freedom,EFI)and the performance of OFDI enterprises’ parent companies were included in the same research system for the first time,which not only theoretically expounded the mechanism of the host countries’ economic freedom affecting the performance of OFDI enterprises,but also empirically verified the effect of the mechanism;Second,the processing method of data samples is relatively novel.The enterprise performance and economic freedom selected in this paper are micro-data at the enterprise level and macro-indicators at the national level respectively.There is a certain degree of overlap when matching the performance of parent companies with the economic freedom of the countries where the overseas subsidiaries are located.In order to ensure the maximum availability of the "enterprise-country" data set,this paper deals with the macro indicators of the countries where all overseas subsidiaries of OFDI enterprises are located by establishing a "virtual country group" method,which lays an important data foundation for subsequent research;Thirdly,the discussion of enterprise heterogeneity is innovative.The research objects selected in this paper are Chinese enterprises that have made direct investment in countries along "the Belt and Road" from 2006 to 2021.The relevant data are all from the database of CSMAR listed companies.The relatively large sample data volume provides support for the study of how economic freedom has a differentiated impact on enterprises in different industries and different ownership attributes.