TITLE:
The Effects of Institutional Difference and Resource Seeking Intent on Location Choice of Chinese Outward FDI
AUTHORS:
Yuanfei Kang, Qian Li
KEYWORDS:
FDI Location Choice, Resource Seeking Intent, Political Risk, Economic Freedom, Chinese Outward FDI
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.5,
April
13,
2018
ABSTRACT: This study seeks to explain how differences in political risk and economic freedom
between host and home countries interact with investing firms’ resource-seeking
intent to influence the firms’ outward foreign direct investment (FDI) location
choice. Using panel data covering Chinese outward FDI in 62 host countries
during the period of 2003-2014, we performed panel data regression analysis.
The results show that when firms’ resource seeking intention is high, the FDI
location choice is negatively associated with the differences in political
risk, but positively associated with the differences in
economic freedom between China and the host countries. The results also show
that there is a substituting effect between political risk and economic freedom
in their interactions with resource-seeking intent to influence FDI location
choice. The findings suggest that the Chinese firms’ outward FDI location choice is a result of the interplay and the fit
between the firms’ external legitimacy in the host countries and the firms’
internal legitimacy within the multinational organization.