Heterogeneity of political connections and outward foreign direct investment

Ziliang Deng, Jiayan Yan and Marc van Essen
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Ziliang Deng: Renmin University of China = Université Renmin de Chine
Jiayan Yan: Renmin University of China = Université Renmin de Chine, University of South Carolina [Columbia]
Marc van Essen: University of South Carolina [Columbia], EM - EMLyon Business School

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Abstract: By examining the heterogeneity of political connections (PCs), this study reconceptualises the relationship between PCs and outward foreign direct investment (OFDI). Drawing upon resource dependence theory, we hypothesise that firms with ascribed PCs benefit from top political privileges in their home market and have a low OFDI commitment. Firms without any PCs have a medium OFDI commitment because they have to avoid the discriminative competition associated with their inferior political status. Firms with acquired PCs possess relatively strong political and market resources and face exchange pressure; thus, they exhibit a high OFDI commitment. The aforementioned hypotheses are supported by empirical results from probit and Tobit models based on panel data of 482 listed Chinese firms with OFDI from 2003 to 2014.

Keywords: Political connection (PC); Outward foreign direct investment (OFDI); Political hierarchy; Resource dependence theory; State-owned enterprise; Privately-owned enterprise (search for similar items in EconPapers)
Date: 2018-08-01
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Citations: View citations in EconPapers (37)

Published in International Business Review, 2018, 27 (4), 893-903 p. ⟨10.1016/j.ibusrev.2018.02.001⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02312122

DOI: 10.1016/j.ibusrev.2018.02.001

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