Research On The Influence Of Institutional Distance On The Binary Margin Of China’s OFDI

Since the reform and opening up,China’s economy has started to grow,and the scale of foreign direct investment by Chinese enterprises has been expanding.With the sluggish world economic growth in recent years,the conflicts from national differences have gradually become stubborn,and the external risks of enterprises investing in host countries have increased accordingly.With the weakening of explicit investment barriers,institutional differences have become the main factor of enterprises’ OFDI by affecting the cost and income of enterprises’ overseas investment,and their relationship has attracted more attention.However,the explanation in the existing literature mostly concentrates at the level of investment scale,and little comes from the perspective of diversified industry entry and industry differences,which can’t cover the relationship between institutional distance and OFDI.Based on the investment data of Chinese enterprises in 137 host countries from 2005 to 2020,this paper analyzes the intensive margin and the expansion margin,and discusses the effect of institutional distance on the binary margin of OFDI in China.The research results show that: first,institutional distance significantly promotes the binary margin of China’s OFDI,and the effect is stronger for the expansion margin;second,in the directional analysis of multi-dimensional institutional distance,the binary margin of China’s OFDI is positive.The most significant influences are the quality of supervision,government efficiency and corruption control,while the over-improvement of laws and regulations will inhibit the growth of the intensive margin;thirdly,in the analysis of country differences,high-income countries with high levels of institutions can promote the binary margin of China’s OFDI,while the low and middle income countries countries with lower institutional level will inhibit it I;but the "Belt and Road" initiative will reduce the positive effect of institutional distance on the intensive margin,and increase that on the expansion margin;Finally,in the analysis of industry differences,institutional distance significantly affect the duality margin of the manufacturing industry,while it has no obvious effect on the intensive margin of the mining and infrastructure industry.Based on the above research results,this paper puts forward corresponding suggestions on how to deal with the impact of institutional distance on the dual margin of China’s OFDI and promote its development from the perspective of Chinese government and enterprises.