Institutions, Culture Distance, and FDI Location Choice: Evidence from China

30 Pages Posted: 30 Oct 2009

See all articles by Julan Du

Julan Du

The Chinese University of Hong Kong (CUHK) - Department of Economics

Zhigang Tao

The University of Hong Kong - School of Business

Yi Lu

School of Business, University of Hong Kong

Date Written: July 2009

Abstract

Using an extensive data set on foreign invested enterprises (FIEs) in the Chinese mainland, we compare the sensitivities of the location choice of foreign direct investment (FDI) from six major source countries/areas (Hong Kong, Taiwan, US, EU, Japan and Korea) toward the variation in the strength of economic institutions across China's regions. It is found that FIEs from the source countries/areas that are culturally more remote from China often exhibit a stronger aversion to regions with weaker economic institutions. Moreover, this pattern is often more salient when FDI takes the form of fully-owned enterprises (FOEs) than when it takes the form of joint ventures (JVs).

Keywords: Economic Institutions, Cultural Distance, FDI Location Choice

JEL Classification: F21, F23, G15, P16

Suggested Citation

Du, Julan and Tao, Zhigang and Lu, Yi, Institutions, Culture Distance, and FDI Location Choice: Evidence from China (July 2009). Available at SSRN: https://ssrn.com/abstract=1495618 or http://dx.doi.org/10.2139/ssrn.1495618

Julan Du

The Chinese University of Hong Kong (CUHK) - Department of Economics ( email )

Shatin, N.T.
Hong Kong

Zhigang Tao

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China
(852) 2857-8223 (Phone)
(852) 2858-5614 (Fax)

Yi Lu (Contact Author)

School of Business, University of Hong Kong ( email )

Rm 730, Meng Wah Complex
Pokfulam Road
Hong Kong
Hong Kong
(852) 2241-5245 (Phone)
(852) 2858-5614 (Fax)

HOME PAGE: http://www.fbe.hku.hk/~luyi

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