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Heterogeneity of political connections and outward foreign direct investment

Author

Listed:
  • Ziliang Deng

    (Renmin University of China = Université Renmin de Chine)

  • Jiayan Yan

    (Renmin University of China = Université Renmin de Chine, University of South Carolina [Columbia])

  • Marc van Essen

    (University of South Carolina [Columbia], EM - EMLyon Business School)

Abstract

By examining the heterogeneity of political connections (PCs), this study reconceptualises the relationship between PCs and outward foreign direct investment (OFDI). Drawing upon resource dependence theory, we hypothesise that firms with ascribed PCs benefit from top political privileges in their home market and have a low OFDI commitment. Firms without any PCs have a medium OFDI commitment because they have to avoid the discriminative competition associated with their inferior political status. Firms with acquired PCs possess relatively strong political and market resources and face exchange pressure; thus, they exhibit a high OFDI commitment. The aforementioned hypotheses are supported by empirical results from probit and Tobit models based on panel data of 482 listed Chinese firms with OFDI from 2003 to 2014.

Suggested Citation

  • Ziliang Deng & Jiayan Yan & Marc van Essen, 2018. "Heterogeneity of political connections and outward foreign direct investment," Post-Print hal-02312122, HAL.
    • Handle: RePEc:hal:journl:hal-02312122
    DOI: 10.1016/j.ibusrev.2018.02.001
    as

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