The Determinants of Chinese Outward Direct Investment

The Determinants of Chinese Outward Direct Investment

New Horizons in International Business series

Hinrich Voss

The rapid international expansion of Chinese enterprises since the 1990s has attracted considerable attention in scholarly and policy circles. This book sheds fresh light on the phenomenon by explaining its determinants using the analytical lens of international business theory.

Chapter 5: Cross-sectional Data Analysis of the Determinants of Chinese Outward Direct Investment

Hinrich Voss

Subjects: asian studies, asian business, asian economics, business and management, asia business, international business, economics and finance, asian economics


This chapter presents two econometric analyses of Chinese OFDI using, first, foreign investment project data as collected by SAFE and, second, aggregated data as published by MOFCOM. The analyses focus on different aspects of the institutional framework as presented in Chapter 2. Section 5.1 focuses on domestic institutional factors and international network effects. Section 5.2 focuses on international institutional factors and international network effects. In order to avoid ambiguity in the presentation of the cross-sectional models and the discussion, the hypotheses 1 to 6 relate to Model 1 while the hypotheses 7 to 15 refer to Model 2. The key findings, as summarised and compared in Section 5.4, are that Chinese MNEs are strongly influenced in their international investment decision-taking by cultural links to the host country, market-seeking motives and, increasingly, resource-seeking motives. The investment risk perception of Chinese firms deviates from common understanding. 5.1 MODEL 1: DOMESTIC INSTITUTIONAL FACTORS AND INTERNATIONAL NETWORK EFFECTS – AN ANALYSIS OF SAFE DATA1 The first econometric analysis focuses predominantly on the effects of domestic institutional factors, namely the effect of the trip by Deng Xiaoping to Southern China in 1992 and the instigation of the ‘Go Global’ policy in 1999, and international networks to host countries as presented in Chapters 2 and 3. 5.1.1 Hypothesis Development for Model 1 The analysis also incorporates the international investment strategy model of Dunning (1993). Hypotheses deriving from the ‘traditional’ drivers 120 M2535 - VOSS PRINT.indd 120 16/02/2011 11:18 Cross-sectional data analysis 121 of international production are...

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