A Study On The Effect Of Confucius Institute On China's OFDI

Due to the difference of the overseas market characteristics,language environment,way of thinking,and domestic laws,the first core problem an enterprise should face is the foreign direct investment location choice before FDI,in order to reduce the risk of the enterprises in overseas investment.Therefore,the location choice of investment destination determines the success or failure of the process of the foreign direct investment.in a large extentAt present,there have been a large number of domestic and foreign literature studied the factors of Chinese enterprises foreign direct investment location choice,but many scholars mainly focus on the investment environment of the host country,such as the domestic economic environment,political environment,institutional environment,cultural environment of the host country and so on.And the home country(investor)as the direct participants of foreign direct investment activities,its effect in promoting enterprises to develop transnational operation has not been fully studied.Therefore,based on the panel data of China's OFDI location during 2004-2012,this paper investigates how Confucius Institute affects China's OFDI.The results show that,Confucius Institute has a significant positive effect on China's OFDI as a platform of foreign cultural exchange.Further,the results show that Confucius Institute's promotion mechanism to China's OFDI depends on two aspects.On one hand,Confucius Institute reduces the negative impact of cultural differences between China and host countries by the way of cultural exchange and mutual learning.On the other hand,it has a substitution effect to the host country's institutional environment.Concurrently,we find that Confucius Institute's impacts on China's OFDI exists heterogeneity constrains.It plays a more outstanding role in those host countries which has smaller cultural differences or lower institutional quality.