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Institutional Difference and FDI Location Choice: Evidence from China

Yi Che, Julan Du, Yi Lu () and Zhigang Tao ()

MPRA Paper from University Library of Munich, Germany

Abstract: Rest upon an extensive data set on Foreign Invested Enterprises (FIEs) in China, we investigate the role of institutional difference in determining the locational choice of foreign direct investment (FDI). Estimation results using firm-level discrete choice model suggest that FIEs from source countries that are more remote institutionally from the Chinese mainland exhibit a higher degree of sensitivity toward regional economic institutions in their choice of FDI location. Furthermore, we find that FIEs coming from countries with better institutions than China are more sensitive to institutional difference. Interestingly, we find that the deterrent effct of institutional distance on FDI entry is mitigated for FIEs coming from countries with more ethnic Chinese in their overall populations.

Keywords: Institutional Difference; FDI Location Choice; China (search for similar items in EconPapers)
JEL-codes: F23 P16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cna, nep-cse, nep-dcm, nep-int and nep-tra
Date: 2017-02-26
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