The Research On The Influence Of Institutional Distance Effect On Chinese OFDI Location Selection

With the development of economy and reform, Chinese enterprises are enhancing itsoutward investment dramatically. The Outward Foreign Direct Investment (OFDI) of Chinais increasing in terms of FDI flows, stocks and the number of company. The practicing ofChinese OFDI has developing, followed by the theory study of it. In the view of institutionaldistance effect, this paper studies how the Chinese OFDI influenced, does the empiricalanalysis, and puts forward suggestions pertinently.Firstly, after analyzing the current situation, this paper notes that the main problem ofChinese OFDI is its concentration in countries and continents. Then, this paper studies howthe institutional distance influence the Chinese OFDI and gets the conclusion that the OFDIinfluence the cost negatively in the model of two countries and that the institutional distanceinfluence the cost positively in the model of incomplete competition. For china, there aregeneral and special problems and this paper assert that Chinese companies will choice theless institutional distance countries to invest no matter the country is developed ordeveloping.Moreover, this paper studies in the method of empirical. The institutional distance isdivided into three parts——the macroeconomics institutional distance (MAID), themicroeconomics institutional distance (MIID) and the law institutional distance (LID). Withthe method of Difference-Generalized Method of Moments (DIF-GMM) andSystem-Generalized Method of Moments (SYS-GMM), this paper gets the conclusion thatChinese firms will invest the country with less MIID and LID and the more MAID. With theempirical test of developed and developing countries separately, this paper gets theconclusion that for developed countries MAID is highlighted and has positive influence. Fordeveloping countries, Chienese OFDI values the LID and has negative influence.Lastly, based on the analysis of theory and empirical, the suggestion from the view of thecountry and firm is that the policy and the direction should be completed and the lessinstitutional distance country should be invested firstly.