Host country institutions and firm-level R&D influences: An analysis of European Union FDI in China
Cai, Huifen; Boateng, Agyenim; Guney, Yilmaz
Dr Yilmaz Guney Y.Guney@hull.ac.uk
Reader in Accounting and Finance
The paper investigates the effects of institutions and their interaction with firms’ research & development (R&D) levels on foreign direct investment (FDI) inflows in China based on a sample of 680 European Union (EU) firms over the period of 1998 to 2008. Employing panel data estimation approaches and further augmented with the cross-validation technique, our results indicate that EU FDI in China is influenced by the host country’s institutions, rendering support to the institutional theory. Our analysis indicates that the rule of law, institutional reforms and the interaction between institutional reforms and R&D have significant effects on FDI inflows in China. Further analysis suggests that the coefficient for the interaction between the rule of law and R&D is positive and significant after World Trade Organisation (WTO) entry implying that the effects of reforms following the WTO entry much outweigh the impact of rule of law in EU firms’ decisions to invest in China. We also find evidence that EU firms tend to adjust their FDI levels in China in an attempt to reach the desired investment level.
|Journal Article Type||Article|
|Journal||Research in International Business and Finance|
|Peer Reviewed||Peer Reviewed|
|APA6 Citation||Cai, H., Boateng, A., & Guney, Y. (2019). Host country institutions and firm-level R&D influences: An analysis of European Union FDI in China. Research in international business and finance, 47, 311-326. doi:10.1016/j.ribaf.2018.08.006|
|Keywords||Business, Management and Accounting (miscellaneous); Finance|
|Copyright Statement||© 2019. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/|
This file is under embargo until Feb 16, 2020 due to copyright restrictions.
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