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How does Cultural Distance Affect Chinese Companies’ Outward Foreign Investment? Evidence from the Belt and Road Initiative

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  • Zheng Fan
  • Lihang Liu
  • Peihua Fan

Abstract

Being proposed from 2013, the Belt and Road Initiative highlights five focuses, which are policy coordination, unimpeded trade, financial integration, facilities connectivity and people-to-people bond respectively. However, we propose that the implementation of people-to-people bond could be hampered by cultural distance between different countries and thus negatively affecting the fulfillment of other focuses. Hence, it’ s an essential prerequisite to verify the impact of cultural distance so as to better promote the connectivity among Belt and Road partners. In this study, we conduct an empirical study on the impact of cultural distance on Chinese companies’ OFDI using a panel data set of 40 countries along the Belt and Road over the period 2014-2020. Results show that cultural distance has a negative impact on Chinese companies’ OFDI in Belt and Road partner countries. What is more, it’ s found that based on the model of national culture developed by Hofstede, Chinese companies pay more attention to the similarity in the cultural dimension of masculinity with host countries when making outbound investment. Our research has both theoretical and practical implications to relevant research fields and the Belt and Road practice.

Suggested Citation

  • Zheng Fan & Lihang Liu & Peihua Fan, 2024. "How does Cultural Distance Affect Chinese Companies’ Outward Foreign Investment? Evidence from the Belt and Road Initiative," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 10(4), pages 271-286, October.
    • Handle: RePEc:ate:journl:ajbev10i4-2
    DOI: 10.30958/ajbe.10-4-2
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