The Influential Factors on Outward Foreign Direct Investment: Evidence from the “The Belt and Road”

ABSTRACT

In this article, we investigate the nonlinear impact on outward foreign direct investment (OFDI) using panel smooth transition regression (PSTR) model with the sample of 12 countries along “The Belt and Road Initiative” in the period of 2010–2015. We find that both overall economic freedom (EF), the interaction of EF and institutional instance, bilateral trade, GDP, and patent significantly influence OFDI. We also demonstrate that EF and economic development exert the inverted “U” effect on OFDI in the different regime. Accordingly, policies specifically designed to increase development of OFDI should be required to address the negative effects considering the differences of EF and economic development.

KEY WORDS:

• institutional distance
• nonlinear impact
• outward foreign direct investment
• PSTR
• the Belt and Road Initiative

JEL Classification:

• C51
• F14
• F42

Acknowledgments

The authors are most grateful to two reviewers for very helpful comments and suggestions.

Notes

1. Due to space limitations, the process of factor analysis is not detailed here.

Additional information

Funding

This work was supported by the Humanities and Social Sciences Fund of the Chinese Ministry of Education [17YJAZH049]. I also would like to thank Guangzhou University for sponsoring this research.