Institutional fragility and outward foreign direct investment from China

Weilei (Stone) Shi, Sunny Li Sun, Daying Yan and Zhu Zhu
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Weilei (Stone) Shi: CUNY-Baruch
Sunny Li Sun: University of Missouri – Kansas City
Zhu Zhu: Montclair State University

Journal of International Business Studies, 2017, vol. 48, issue 4, No 3, 452-476

Abstract: Abstract We develop the concept of institutional fragility to investigate the outward foreign direct investment (OFDI) behavior of firms from emerging economies. When different dimensions of institutions are not progressing at the same pace, internal friction and conflict arise during institutional development. Such fragility could push a firm to escape its home country as a strategic response. Using a sample of 578,360 Chinese firm-year observations over a 10-year period, we find that institutional fragility at the provincial level is associated with increased OFDI decision. This relationship is weaker when firms have high productivity or have been controlled by state with high ownership, stronger when firms have a high level of export network. Overall, our institutional fragility perspective extends and enriches the institution-based view and offers new insights into OFDI behavior.

Keywords: institution-based view; outward foreign direct investment; emerging economies; market-based reform (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (95)

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DOI: 10.1057/s41267-016-0050-z

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