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Impact of cultural trade on foreign direct investment: Evidence from China

Chang Li, Chu Wang, Lianxing Yang and Baoju Chu

Emerging Markets Review, 2023, vol. 55, issue C

Abstract: Value of cultural goods varies across consumers with different backgrounds. Exchange of cultural goods may lead to better mutual understand and trust, which helps mitigate the entry obstacles in the investment targets. This paper studies how cultural trade affects Chinese firms' outbound foreign direct investment (OFDI). We find that both likelihood and total volume that a firm invests in a foreign country increase with the amount of bilateral cultural trade. We further show that cultural trade boosts the success rate of OFDI projects. These effects are intensified in targets with weaker institutional quality or a great cultural distance to China.

Keywords: Cultural trade; Foreign direct investment; Institutional quality; Cultural distance (search for similar items in EconPapers)
JEL-codes: F14 F21 F23 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.ememar.2022.100976

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