Does distance from government hinder enterprises’ OFDI？Evidence from China

Long Wang, Wenjun Ji, Teng Zhang and Xiaoqian Liu

Economic Systems, 2025, vol. 49, issue 2

Abstract: This study analyzes the impact of government–enterprise distance on the probability of outward foreign direct investment (OFDI) with matched data from Chinese prefecture-level municipal governments, the Chinese industrial enterprises database, and the directory of overseas investment enterprises. We determine that increased distance between the government and enterprises has a significant negative impact on the probability of enterprises’ OFDI. Mechanism analysis demonstrates that increased government–enterprise distance, which causes higher information search and relationship building costs, and decreased accessibility of public service, are the main reasons for this decline.

Keywords: Grabbing hand hypothesis; Government–enterprise distance; OFDI JEL classification codes: C26, D22, D82 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:49:y:2025:i:2:s093936252400092x

DOI: 10.1016/j.ecosys.2024.101270

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