How geographic, cultural, and institutional distances shape location choices of China’s OFDI in tourism? – an empirical study on B&R countries

ABSTRACT

This paper examines how bilateral distances shape Chinese enterprises' outward foreign direct investment (OFDI) in tourism in Belt and Road (B&R) countries. The results indicate that while geographic distance is not a key factor explaining the location choice of Chinese tourism OFDI in B&R countries, cultural distance hinders this location choice in a linear and monotonic way. Chinese enterprises prefer B&R countries with a short institutional distance from China for OFDI in tourism to avoid the “outsider disadvantage”. Moreover, market scale is found to be a moderating factor influencing the impacts of various distances on tourism OFDI location choice.

KEYWORDS:

• “Belt and Road” initiative
• China
• OFDI
• tourism investment
• Silk Road Action Plan
• multiple distances
• geographic distance
• cultural distance
• institutional distance
• location choice

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Vision and actions on jointly building silk road economic Belt and twenty-first-century maritime Silk Road, http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html

2. http://www.cepii.fr/CEPII/en/cepii/cepii.asp

3. Data on Chinese enterprises’ OFDI in tourism in each B&R country by year are unavailable from statistical yearbook. Thus, we use data on tourism OFDI collected from COIEC released by China’s Ministry of Commerce. There are two advantages of using this database. First, it covers data from 2006 to 2015 and, therefore, provides a long-term data on Chinese OFDI in B&R countries. Secondly, compared to the aggregate investment flow and investment stock data, these data provide the number of OFDI projects, which can preferably reflect the decision-making behaviors of enterprises’ OFDI location at a disaggregate level. The panel dataset comprises B&R countries during a 10-year period in our analysis.

Additional information

Funding

This work was supported by MOE (Ministry of Education of the People’s Republic of China) Project of Humanities and Social Sciences [Project No. 17YJC790021], and the Innovation Fund of Shanghai University of Finance and Economics for Postgraduate [grant no. CXJJ-2018-421].