Policy, institutional fragility, and Chinese outward foreign direct investment: An empirical examination of the Belt and Road Initiative

Sutherland, Dylan; Anderson, John R.; Bailey, Nicholas J.; Alon, Ilan

doi:10.1057/s42214-020-00056-8

Cited by 94 publications

(53 citation statements)

References 55 publications

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“…The specific home institutional context of CMNEs has, however, inflamed the seriousness of this issue. This finding adds further legitimacy to the importance of the institutional perspective as a productive lens for understanding emerging market MNEs generally and CMNEs specifically (Sutherland, Anderson, Bailey, et al 2020). Official data from other countries may have uniquely serious methodological concerns relating to their specific contexts.…”

Section: Broader Implications Of Our Findingsmentioning

confidence: 59%

Analyzing the reliability of Chinese outward FDI studies: a replication approach

Anderson¹,

Sutherland²,

Zhang³

et al. 2020

cpoib

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Purpose Many academic studies in international business empirically test the determinants of Chinese outward (O)FDI. A weakness with these studies is the limited critical evaluation given to the way in which Chinese OFDI data is collected and used. Chinese multinational enterprises (C)MNEs frequently establish special purpose entities in tax havens to transit FDI via intermediary jurisdictions. The purpose of this paper is to develop an alternative approach for measuring CMNE OFDI and subsequently explore how the results of previous studies may have been confounded use of tax havens by MNEs. The authors address the latter question by replicating widely cited quantitative studies. Design/methodology/approach Replication approach. Findings Through the replication of several studies, this paper finds high levels of discrepancies in general sign and significance between global ultimate ownership modeling results and those using officially recorded FDI data. More specifically, the main areas impacted by using official data rather than data which accounts for the use of tax havens are cultural proximity, geographic distance and natural resource seeking. Practical implications This paper looks at studies, which use official FDI data to understand CMNE behavior. It is important to note, however, that there are many hundreds, if not thousands, of studies that use other national-level FDI data to draw similar types of inferences about MNE activity. In this sense, the authors’ critical evaluation of CMNE work holds a much broader and, arguably, more important question: How reliable, in general, are studies, which use officially recorded FDI data? The results from this paper have already caused reflection on the impact of tax haven use on official FDI collection organizations, such as the OECD. Social implications The social implications of companies using tax havens to route FDI is immense. The use of tax havens not only aids in tax minimization for companies, but also obscures the true providence and identity of companies. This is problematic in a society, which increasingly desires to understand where, how and by whom a product or service was created prior to consumption. Originality/value This paper argues that the tendency for Chinese MNEs to establish offshore holding companies in tax havens has given rise to significant biases in official FDI statistics. Through the use of global ultimate ownership data, the authors have put forward an alternate approach to measure genuine CMNEs’ OFDI activity, one which confronts and deals with their pervasive engagement with tax havens. Through the replication of several Chinese OFDI location choice studies, it was possible to understand how methodological issues stemming from the use of official FDI data may influence prior econometric results. In doing so, the authors hope to have sparked a debate which may lead to a re-evaluation of earlier received wisdom regarding Chinese MNE investment strategy and behaviors. This in turn should foster improved theorizing regarding the Chinese MNE and its outward investment activities.

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Section: Broader Implications Of Our Findingsmentioning

confidence: 59%

Analyzing the reliability of Chinese outward FDI studies: a replication approach

Anderson¹,

Sutherland²,

Zhang³

et al. 2020

cpoib

Self Cite

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“…Based on the current development and policies as part of BRI, it seems China is trying to promote and diffuse its own development model and experience into other countries, particularly into emerging economies. This approach to development may favor certain institutional configurations, such as relatively weak legal and economic institutions, and amplify the impacts of institutional fragility as a mechanism for promoting Chinese outward FDI to other emerging economies (Sutherland et al , 2020). It would be interesting to further study the impact of institutional environments of BRI countries on MNEs' behaviors, decisions and strategies.…”

Section: Discussionmentioning

confidence: 99%

Editorial

Zhou¹,

Williamson²,

Tung³

2021

CCSM

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“…Similarly, China also expects enterprises to increase their international market position through OFDI (Hurst, 2011). Nevertheless, under the guidance of the "Opening up" policy, only a small number of enterprises have participated in outward foreign direct investment and most of them are state-owned enterprises, which is far from the goal of China to promote domestic enterprises to engage in OFDI (Sutherland, Anderson, Bailey, & Alon, 2020). As shown in Figure 2…”

Section: Investment Statusmentioning

confidence: 99%

The effect of the Chinese government policies on outward foreign direct investment by domestic enterprises: A policy analysis

Peirong

Al‐Tabbaa

2021

Strategic Change

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China has issued several policies aimed at driving domestic enterprises to engage in outward foreign direct investments. By analyzing these policies, their impact appeared to have a double‐edged sword effect. As China's capital inflows remained far more significant than capital outflows, the Chinese government has issued several policies, including the “Go globally” strategy and the “The Belt and Road” initiative aimed at driving domestic enterprises to engage in outward foreign direct investment (OFDI). Using policy analysis technique, we analyze the OFDI‐related advantages that can be achieved to domestic enterprises under the influence of government policies to identify their impact. While the analysis shows that the Chinese government policies promoting OFDI for enterprises, stimulating domestic enterprises to expand globally also negatively impacts the OFDIs themselves.

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Policy, institutional fragility, and Chinese outward foreign direct investment: An empirical examination of the Belt and Road Initiative

Cited by 94 publications

References 55 publications

Analyzing the reliability of Chinese outward FDI studies: a replication approach

Analyzing the reliability of Chinese outward FDI studies: a replication approach

Editorial

The effect of the Chinese government policies on outward foreign direct investment by domestic enterprises: A policy analysis

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