Home country institutional restraint and outward foreign direct investment: Evidence from Chinese heterogeneity enterprises

Abstract

Based on an analysis of 2671 outward foreign direct investment (OFDI) deals completed by Chinese enterprises from 2009 to 2018, this study evaluated the role of the OFDI regulatory policies on Chinese heterogeneity enterprises' OFDI. The difference-in-differences model is applied with the OFDI data to control the influence of endogeneity resulting from missing variables. The results show that the regulatory policies' effect on Chinese enterprises' OFDI varies with the ownership structure of the home country's enterprises. The implementation of OFDI regulatory policies significantly reduces the OFDI of state-owned enterprises but does not significantly impact that of privately owned enterprises. Interestingly, the policies significantly reduce the OFDI of central state-owned enterprises but do not significantly impact that of local ones. The former benefit from central government institutional support, and their main purpose is to comply with national strategy. By contrast, local governments administer the local state-owned enterprises, whose main purpose is to promote local economic development. In terms of seeking profits, their investment choices are similar to those of privately owned enterprises. This study also examines China's OFDI policy responses.