Psychic distance and outward foreign direct investment: the moderating effect of firm heterogeneity

2020 ◽  
Vol 58 (7) ◽  
pp. 1497-1515
Author(s):  
Chusheng Chen ◽  
Yun Zhan ◽  
Changjun Yi ◽  
Xue Li ◽  
Yenchun Jim Wu
Keyword(s):  
Foreign Direct Investment ◽  
Emerging Economies ◽  
Direct Investment ◽  
Multinational Firms ◽  
Firm Heterogeneity ◽  
Moderating Effect ◽  
Psychic Distance ◽  
Outward Foreign Direct Investment ◽  
Content Type ◽  
Foreign Experience

PurposeThis study investigates the effect of psychic distance (PD) on outward foreign direct investment (OFDI) by multinational firms originating in emerging economies and the moderating effect of firm heterogeneity on this relationship.Design/methodology/approachAn empirical analysis based on a negative binomial regression model is conducted using OFDI data from 2008 to 2017 on companies listed on the Shanghai and Shenzhen Stock Exchanges in China, an emerging economy.FindingsThe results suggest a U-shaped relationship between PD and OFDI by firms in emerging economies. Both executive foreign experience and state ownership negatively moderate the U-shaped relationship between PD and OFDI.Practical implicationsEmerging economies should encourage and guide multinational firms in engaging in OFDI and emphasize the advantages and disadvantages of PD for multinational firms. Additionally, non-sate-owned firms should recruit those who have a foreign education to provide support for OFDI by firms in emerging economies. Multinational firms should determine investment locations by consulting with executives with foreign experience to improve their ability to engage in OFDI.Originality/valueThis study combines macro and micro perspectives and integrates PD and firm heterogeneity into the same model with a sample of multinational firms originating in China. The findings support the existence of a PD paradox, which helps to enriching the theory on foreign direct investment.

The largest financial groups from emerging economies

2018 ◽  
Vol 13 (5) ◽  
pp. 1050-1069 ◽  
Author(s):  
J. Francois Outreville
Keyword(s):  
Foreign Direct Investment ◽  
Emerging Economies ◽  
Direct Investment ◽  
Multinational Firms ◽  
Emerging Countries ◽  
Strong Impact ◽  
Internationalization Process ◽  
Host Countries ◽  
Content Type ◽  
Financial Groups

Purpose Numerous articles contain recommendations as to how emerging countries can attract foreign direct investment on terms that are beneficial to both the investing firm and the host society but very few explore the conditions for firms from emerging countries to invest abroad. The purpose of this paper is twofold: the first is the documentation of the preferred locations of foreign affiliates for the largest financial groups headquartered in emerging countries; and, second, is to identify some of the determinants associated with the location-specific advantages of these host countries. Design/methodology/approach The analysis of the internationalization process of these groups is based on a list of top financial groups ranked by total assets. In the empirical section, the factors that explain the choice of these locations by multinational firms are categorized as resources seeking, market seeking, efficiency-seeking variables and cultural variables. Findings There is empirical evidence that institutions prefer to invest in foreign locations that minimize some dimensions of the culture. Other factors like the role of efficiency variables, i.e. trade efficiency, political risk and government effectiveness, in host countries also have a strong impact on the determinants of the internationalization process. Originality/value The paper puts forward a framework for analyzing determinants of foreign direct investment of multinational financial groups from emerging economies.

scholarly journals How does Outward Foreign Direct Investment Affect Enterprise Green Technology Innovation? — Based on the Moderating effect of Resources

2021 ◽  
Author(s):  
Haoqiang Wu ◽  
Sumin HU
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Technology Innovation ◽  
Transition Process ◽  
Green Technology ◽  
Moderating Effect ◽  
Outward Foreign Direct Investment ◽  
Regulatory Effect ◽  
Absorbed Slack ◽  
Unabsorbed Slack

Abstract with the increasing strict environmental regulations in the green transition process, outward foreign direct investment is considered to be an effective approach to promote enterprises’ green technology innovation. Thus, this paper establishes a comprehensive research framework that integrates OFDI and green technology innovation from the micro level of the enterprise to analyze it. The findings show that: First, OFDI will positively affect corporate green-tech innovation as expected; Government subsidies have a U-shaped regulation on the relation between OFDI and green-tech innovation; Absorbed slack plays an inverted U-shaped moderating effect on the relation between OFDI and green-tech innovation, and the unabsorbed slack positively affect this process. As for the heterogeneity of property rights, the test results of non-state-owned enterprises and state-owned enterprises are basically consistent with the baseline results, except for the following two points: the unabsorbed slack of state-owned enterprises has no regulatory effect between OFDI and enterprise green technology innovation, and the absorbed slack of non-state-owned enterprises has no regulatory effect between OFDI and enterprise green technology innovation.

Outward Foreign Direct Investment in Emerging Economies

2017 ◽  
pp. 244-257 ◽  
Author(s):  
Ahmet Oğuz Demir ◽  
Muhammad Moiz
Keyword(s):  
Foreign Direct Investment ◽  
Emerging Economies ◽  
Direct Investment ◽  
Outward Foreign Direct Investment ◽  
Competitive Advantages ◽  
Global Competitiveness ◽  
Developed Economies ◽  
Technological Readiness ◽  
Country Factors ◽  
Global Competitiveness Index

Outward Foreign Direct Investment (OFDI) has been utilized by developed economies to enter developing markets for competitive advantages. However, recent boom in OFDI from emerging economies has prompted the question as to why these economies are investing abroad? A modest amount of literature exists regarding China and India, however, Turkey being an emerging economy has been largely untapped when it comes to determinants of OFDI. This study uses the Global Competitiveness Index (GCI) to find host and home country factors which have led to OFDI from Turkey to their top 10 investment destinations for the past 10 years. The host country factors found to be significantly correlated with Turkish OFDI are innovation (Netherlands and Russia), technological readiness (Russia and UK), labor market efficiency (Netherlands), infrastructure (Netherlands), domestic market size (Germany), and exports (UK). The home factors found to be significantly correlated with Turkish OFDI are infrastructure and domestic competition.

Chinese outward foreign direct investment

2018 ◽  
Vol 34 (4) ◽  
pp. 10-12
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Design Methodology ◽  
Reading Time ◽  
Outward Foreign Direct Investment ◽  
Foreign Markets ◽  
Content Type ◽  
Pertinent Information ◽  
Strategic Motives ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings This briefing looks at the strategic motives behind Chinese firms when looking to expand globally and create subsidiaries in foreign markets. Originality/value The briefing saves busy executives, strategists, and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

scholarly journals Emerging Economy Inward and Outward Foreign Direct Investment: A Bibliometric and Thematic Content Analysis

2021 ◽  
Author(s):  
Keilla Dayane da Silva-Oliveira ◽  
Edson Keyso de Miranda Kubo ◽  
Michael J. Morley ◽  
Rodrigo Médici Cândido
Keyword(s):  
Foreign Direct Investment ◽  
Performance Analysis ◽  
Emerging Economies ◽  
Thematic Analysis ◽  
Direct Investment ◽  
Institutional Environment ◽  
Emerging Economy ◽  
Future Research ◽  
Outward Foreign Direct Investment ◽  
Outward Fdi

AbstractResearch examining emerging economy inward and outward foreign direct investment (FDI) flows is on a significant upward trajectory. In this bibliometric analysis covering 806 articles published between 1994 and 2019, we map key aspects of its contours. Our analysis proceeds in two sequential phases involving a performance analysis, followed by a thematic analysis. Our performance analysis unveils fundamental elements of the structure of the knowledge base. Our subsequent thematic analysis identifies three focal topics arising from identifiable shared qualities characterizing this literature. Firstly, we distinguish scholarship focused on inward FDI into emerging economies formed by two particular classes, namely ‘innovative FDI’ and ‘capital flows’. Our second theme covers outward FDI from these emerging economies and also comprises two specific classes referring to the ‘institutional environment’ and the ‘theoretical framework deployed’. Our final theme relates to an integrated body of knowledge explicating aspects of the location choice decision. Building on this analysis, we isolate a number of opportunities for future research.

Political risk distribution of Chinese outward foreign direct investment

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Qiuyu GaoYan
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Multinational Enterprises ◽  
Risk Index ◽  
Political Risk ◽  
Principal Component ◽  
Government Support ◽  
Outward Foreign Direct Investment ◽  
Content Type ◽  
Risk Distribution

PurposeThe purpose of this paper is to contribute to a better understanding on relations between Chinese Outward Foreign Direct Investment (OFDI) and host country political risk. To contribute to a better understanding of whether traditional wisdom on foreign direct investment (FDI) is sufficient to explain the internationalization of Chinese multinational enterprises, the author collected 15 proxy variables from the PRS Group and Heritage Foundation and applied principal component analysis (PCA) to construct a new political risk index (PRI) that measures multiple facets of political risk for 139 countries.Design/methodology/approachUsing this new PRI as a criterion, the author investigated changes in the political risk distribution (PRD) of Chinese outward FDI (OFDI) regarding investment destinations, large projects, annual investment outflows and sectorial distributions from 2006–2017.FindingsThe author found that the vast majority of Chinese OFDI during this period is concentrated in moderate- and low-risk countries, even at the sectorial level. This paper also shows that the continuing reform of Chinese OFDI policy and strong government support have led to an unprecedented increase in Chinese OFDI, while the PRD of Chinese OFDI has maintained a gradual decline over the past decade.Originality/valueThis research provides a new measurement that covers multiple facets of political risk.

Outward Foreign Direct Investment in Emerging Economies

2020 ◽  
pp. 1244-1257
Author(s):  
Ahmet Oğuz Demir ◽  
Muhammad Moiz
Keyword(s):  
Foreign Direct Investment ◽  
Emerging Economies ◽  
Direct Investment ◽  
Outward Foreign Direct Investment ◽  
Competitive Advantages ◽  
Global Competitiveness ◽  
Developed Economies ◽  
Technological Readiness ◽  
Country Factors ◽  
Global Competitiveness Index

Outward Foreign Direct Investment (OFDI) has been utilized by developed economies to enter developing markets for competitive advantages. However, recent boom in OFDI from emerging economies has prompted the question as to why these economies are investing abroad? A modest amount of literature exists regarding China and India, however, Turkey being an emerging economy has been largely untapped when it comes to determinants of OFDI. This study uses the Global Competitiveness Index (GCI) to find host and home country factors which have led to OFDI from Turkey to their top 10 investment destinations for the past 10 years. The host country factors found to be significantly correlated with Turkish OFDI are innovation (Netherlands and Russia), technological readiness (Russia and UK), labor market efficiency (Netherlands), infrastructure (Netherlands), domestic market size (Germany), and exports (UK). The home factors found to be significantly correlated with Turkish OFDI are infrastructure and domestic competition.

Technological innovation policy and Chinese heterogeneity enterprises' outward foreign direct investment

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jinjing Zhao ◽  
Jongchul Lee
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Innovation Policy ◽  
Local Economy ◽  
Outward Foreign Direct Investment ◽  
Central State ◽  
Chinese Enterprises ◽  
Content Type ◽  
Privately Owned

PurposeThe study aims to analyze the role of the Made in China 2025 (MIC2025) initiative in China's Outward Foreign Direct Investment (OFDI) and the factors affecting the success or failure of Chinese enterprises' OFDI from the perspectives of the heterogeneity of home country enterprises.Design/methodology/approachBased on data on China's OFDI obtained from the China Global Investment Tracker (CGIT), the study uses the difference-in-differences model to analyze 2,670 completed OFDI deals and 211 failed OFDI deals by Chinese enterprises, from 2009 to 2018.FindingsThe study found that the effect of MIC2025 on Chinese enterprises' OFDI varies according to the ownership structure of the home country's enterprises. For successful OFDI, MIC2025 significantly impacted central state-owned enterprises (CSOEs), while it did not significantly influence local SOEs and privately owned enterprises. For failed OFDI, the MIC2025 plan only increased the failure of CSOEs' OFDI for the technology-seeking motivation in high-income host countries. Further, the investment options of local SOEs differ from those of CSOEs. Considering their aim to drive the local economy and seek profits, they are more similar to those of privately owned enterprises.Originality/valueThis study used a new database (i.e. the CGIT) to analyze Chinese enterprises' OFDI. It discussed the role of MIC2025 for different enterprises from the perspectives of successful and failed OFDI. It thus provided a new basis for analyzing policy affecting the OFDI of Chinese enterprises.

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