The Internationalization Motivations, Institution Environment, And The Location Choice Of Chinese Outward Foreign Direct Investment

After joining in the World Trade Organization, Chinese outward foreign direct investment (OFDI) grew rapidly, in 2013 it has been the third largest foreign investor for 2 years, and the investment to developed economies increased rapidly and the ratio to all Chinese OFDI has risen from 5.86%in 2008 to 12.8% in 2013. According to traditional theories, outward foreign direct investment is a process of seeking the best combination of competitive advantage with location attraction, so as to achieve its development strategy in the investment destination. Location advantage is homogeneous for all multinational corporations to a certain extent, so the traditional theories of foreign direct investment are mainly based on the competitive advantages of the parent company, namely obtain excess profit through the use of "surplus resources" in globalization. The booming of developing countries’foreign direct investment that lack of competitive advantages and the rapid growth of Chinese upstream investment, both need to be studied in a new angle of view.Makino et al. considered that we should research on this problem on the view of motivations and abilities. According to the enterprise endogenous growth theory, the enterprise’s internal resources, abilities and their combination are the dominant factors for their growth, their imbalance or mismatch may limit the growth of enterprises. The enterprise internationalization growth is the same, which can operate the "excess resources or capacity" that produced domesticly in foreign countries and reach a new equilibrium through the OFDI to expand the market or promote efficiency; they can also seek compensatory assets in the global market and obtain the portfolio balance, and then enhance their competitiveness. Therefore, OFDI is not only the process of transferring the capital, technology, channels and other comprehensive factors, also is a way to obtain strategic resources.Outward foreign direct investment is influenced and limited by local politics, economic system, culture, values and operating habits and so on, so that it is a more complicated international economic behavior than domestic business. Chinese unique political system and social development has made a great difference with other countries in macro institutional environment, also it formed the unique structure of the enterprises in our country, it’s necessary to study our country’s OFDI behaviors on the view of institution. Institution Based View (IBV) points out that institution environment has direct and indirect effects on foreign direct investment decision, but what’s the effect itself and how it affects the investment decision through influencing the other variables, there is lack of corresponding researches.Based on the theories of OFDI location choice theory, internationalization motivations theory and Institution Based View theory; this study empirically analyzed and tested on the above problems through the macro national level panel data. We drew the corresponding conclusions from the following several researches:Firstly, we analyzed the strategic motivations and institution environment’s influence for Chinese overall OFDI, and also analyzed the effects of institution environment on the different motivations driven OFDI through the interaction of strategic motivation and institution environment. Results showed that:Chinese overall enterprises OFDI had the significant market-seeking, efficiency-seeking and natural resource-seeking motivations, and the creative assets-seeking motivation was not significant. As a whole, the formal institutional quality of the host country had significant positive relationship with Chinese OFDI and they preferred to invest in the countries and regions with better institution. On the mediation effects of institutional environment, the perfect institutional environment of the host country can significantly promote Chinese market-seeking OFDI, but has reverse blocking effect to Chinese efficiency-seeking OFDI that pursuing cheap labor cost.Then using the panel data regression analysis, we compared the strategic motivations and institution influences between the Chinese downstream OFDI to developing countries and upstream OFDI to developed countries, and also analyzed the moderating effect of the institution. The analysis showed that, Chinese downstream OFDI had significant market-seeking, efficiency-seeking and natural resource-seeking motivations, didn’t have the significant motivation of seeking creative assets; and the upstream OFDI to developed countries not only had significant market-seeking motivation, but also had the remarkable creative assets-seeking motivation. Chinese downstream investment tended to invested in developing countries and regions with better institution, but the upstream investment had significantly negative correlation with host country’s institution quality. The good institution environment in developing countries had significant negative mediation effects with Chinese efficiency-seeking OFDI and resources-seeking OFDI; but the institution quality in developed countries had significant positive influences to Chinese market-seeking and resource seeking OFDI, they prefer developed countries with better institutional environment.Finally, using the panel data regression analysis, we compared the motivations and institutional influences between Chinese OFDI in Asia and Europe, and also analyzed the moderating effect of the host country institutional quality on different motivations driven OFDI. The analysis results are as follows:Chinese OFDI in Asia had significant market-seeking and efficiency-seeking motivations, and OFDI in Europe had significant market-seeking and creative assets-seeking motivations. Asian countries’institution quality didn’t have significant effect to Chinese OFDI, but OFDI in Europe preferred countries with poor institutional environment. Asian countries’ institution quality had significant positive mediation effect to Chinese resource-seeking and creative assets-seeking OFDI, two types of investment preferred Asian countries with better institution environment; the host countries’institution quality had a significant positive mediation effect on the market-seeking OFDI in Europe, our market-seeking OFDI preferred better institution environment in European countries.From the above studies, we verified Chinese OFDI not only had the traditional "resources exploitation" motivations, but also had the "resources exploration" motivation, and we also proved the institutional quality both have direct effect and indirect moderating effect on Chinese OFDI.The theoretical contributions of this study are:(1) First we proved and expanded the theory of outward foreign direct investment of developing countries. In this paper, with a number of empirical studies we found that Chinese enterprise OFDI both have traditional "resource exploitation" motivations and "resource exploration" motivation in obtaining the creative assets, this provided evidence for the internationalization strategy motivations of enterprises in developing countries OFDI theory, and enhanced the applicability of these theories. (2) It enhanced the application of Institution Based View in the location choice of OFDI. This paper not only test the direct effects of host countries’institutional environment to Chinese whole, different flows and different regions OFDI through empirical researches, and also analyzed the mediation effects of institution environment on four different motivations derived OFDI, verified the direct and indirect effects of institution environmental on Chinese OFDI decisions.This paper had a certain practical significance for Chinese enterprises’overseas OFDI:First of all, our enterprises should choose the host countries with resources and institutional environment that match their internationalization motivations; Secondly, Chinese enterprises should enhance their ability to adapt to the restraint institution, so as to reduce the obstacles of investment in the developed countries because of the large institutional gap; Finally, we should strengthen our country’s creative assets-seeking OFDI, and enhance the enterprise knowledge absorptive capacity, promote their international competitiveness.