Empirical Research Of The Impact Of Differences In Political Risk Between Home Country And Host Country On OFDI Location Choice

The world economy has been in the doldrums for a long time and international capital has returned.The report points out that the main reasons for these phenomena are the rise of trade protectionism and the frequent occurrence of geopolitical factors.The complex and changeable environment of the host country forces the multinational enterprises of the home country to face higher political risks in international investment.Compared with the international investment trend of decline,led by China’s emerging economies are in accelerating the pace of foreign direct investment,by the end of 2018,China has become the world’s second largest foreign investor,and has been for several years investment accounted for more than ten percent of the total global,this also means that more Chinese transnational enterprises are gradually on the international stage.In the face of complex and differentiated host country institutional environment,political risk factors will be the core issue that Chinese multinational enterprises need to face in ofdi.From the perspective of transaction cost and organizational learning,this study analyzes the influence of differences in political risk between the home country and the host country on the location selection of fdi by transnational enterprises.At the same time,institutional distance and bilateral economic relationship are introduced into the theoretical model as moderating variables.On the basis of theoretical analysis,empirical analysis was conducted with Stata14.First,descriptive analysis was conducted on the sample size,mean value,standard deviation,maximum value and minimum value of each variable.Then,Pearson and VIF were used to verify whether there was serious multicollinearity between variables.Then,in order to find out the sequence stability of the model,LLC test was used to verify it.Then,four regression models were established for the control variables,explanatory variables and regulatory variables,and twelve models were established for the single factor of political risk difference.The robustness test was carried out by replacing the GMM estimation model with the fixed effect estimation model,sub-sample testing according to the direction of political risk differences between the home country and the host country,and sub-sample testing according to the development level of the host country.Finally,according to the regression results,the research hypothesis is verified,the research conclusion is drawn and relevant Suggestions are put forward.The results of this paper show that:(1)the difference of political risk between the home country and the host country has a significant negative impact on the location selection of fdi by transnational enterprises;(2)institutional distance strengthens the negative relationship between the difference in political risk and the location choice of fdi by transnational enterprises;However,bilateral economic relations have no significant influence on the relationship between political risk difference and location choice of fdi by transnational enterprises.(3)in the single political risk difference between the home country and the host country,the differences in political risk factors such as internal conflict and corruption have a more significant impact on the location selection of fdi by transnational enterprises;(4)the positive and negative gradient political risk differences between the home country and the host country have the same significant negative impact on the location selection of ofdi.Based on the theory of transaction cost and organizational learning,home country and host country political risk differences to the multinational enterprise’s influence of foreign direct investment location choice,and subdividing home country and host country political risk differences,not only can enrich the political risk research and can also be foreign direct investment location choice for multinational enterprises to provide more specific reference.