Psychic Distance,Enterprise Heterogeneity And Outward Foreign Direct Investment Decisions

With the implementation of the "going global" strategy and the "one belt and one way" initiative,Outward Foreign Direct Investment(OFDI)plays an important role in China’s economic development.More and more Chinese companies have achieved internationalization through foreign direct investment.However,the international environment is complex,and multinational companies need to face many threats and challenges.Especially,the psychological distance caused by differences in political,economic,cultural and geographical aspects between the host country and the home country.In 1956,Beckerman proposed the concept of psychological distance,and believed that psychological distance is an important factor affecting the overseas expansion of enterprises.Subsequently,the University scholars of the Uppsala defined psychological distance as “the sum of factors that hinder or interfere with the flow of information between markets” and found that psychological distance has an important impact on international direct investment.However,the existing literatures mostly focus on developed countries and examine the impact of host country location factors on OFDI at the macro level,and pay less attention to the heterogeneity of enterprises at the micro level.In fact,when investing overseas,companies must consider not only external environmental factors,but also the internal characteristics of the company itself.As the makers of enterprise strategy,executives have the characteristics of incomplete rationality,and their behavior is often influenced by past experience.For overseas background executives,the unique overseas experience gives them different cognitive model from local executives,and it will affect the decision-making of enterprise overseas investment.In addition,for Chinese enterprises,enterprise ownership gives them different investment motivation and resource acquisition power,which makes different enterprises have different decision-making in OFDI.Therefore,this paper focuses on the overseas background of executives and corporate ownership in corporate heterogeneity.In order to better clarify the role of psychological distance and corporate heterogeneity in OFDI.Firstly,this paper reviews the research status of influencing factors in OFDI,and focuses on the analysis of psychological distance,executive overseas background,and enterprise ownership.Secondly,taking the Shanghai-Shenzhen listed company as the research object,this paper uses the negative binomial regression model to analyze the relationships among the psychological distance,the overseas background of senior managers,the ownership of enterprises,and the decision-making of foreign direct investment.Considering that the heterogeneity of enterprises may affect the relationship between psychological distance and foreign direct investment,this paper further examines the regulatory role of executive overseas background and corporate ownership on psychological distance.In order to deeply explore the mechanism of psychological distance on foreign direct investment,this paper conducts group regression,grouping according to the mean and median of psychological distance,and explores whether there are differences in decision-making of outward FDI in different psychological distance ranges.Grouped according to different investment motivation,this paper examines whether psychological distance has different influence on FDI g under different investment motivation.The final conclusion is as follows: Firstly,there is a negative relationship between psychological distance and foreign direct investment;Secondly,the overseas background of senior executives is positively affecting foreign direct investment.Thirdly,state-owned enterprises are more likely to make foreign direct investment than non-state-owned enterprises;Fourthly,senior managers’ overseas background and enterprise ownership can positively regulate the negative effect of psychological distance,that is,they can weaken the negative impact of psychological distance on foreign direct investment.Fifthly,through grouping regression,it is found that there is a threshold effect on psychological distance.Under different investment motives,the influence of psychological distance on OFDI decision-making is different.Finally,according to the results of this study,relevant suggestions are put forward from the national and enterprise levels.The state should take the initiative to establish good political relations with other countries,actively promote cultural exchanges with other countries,and encourage and support non-state-owned enterprises to make foreign direct investment;At the same time,enterprises should attach importance to the strength of returnees,and integrate talent resources to reduce the risk of overseas investment.Different from the previous macro-level studies,this paper combines the macro-and micro-perspective to incorporate psychological distance and enterprise heterogeneity into foreign direct investment decision-making,which is of great significance for enriching and perfecting the existing theories.