The impact of contextual distance on the investment locations of Chinese multinationals in countries along the Belt and Road Initiative

Abstract

ABSTRACT This study has investigated the impact of contextual distance between home and host countries on the location choice of Chinese multinational enterprises in Asia and Europe, with special attention to the impact of the Belt and Road Initiative (BRI). Through our analysis, we have extended existing IB research of contextual distance to include some new dimensions, such as the policy alignment between home and host countries, existence of home country’s business networks, ethnic communities, and language and cultural institutions in host countries, as well as their historical links. The effects of these factors are also contrasted by the ownership attributes of investing firms, i.e. Chinese SOEs and POEs, to detect the importance of firm-level factor in influencing the effect of contextual distance. The analysis of 4437 Chinese greenfield investment projects between 2003 and 2019 in Europe and Asia – based on a conditional logit model – provided support but also qualified some of our hypotheses, which constitute our main contribution to the theoretical and empirical literature on the location choice of Chinese multinational enterprises in general and on Chinese investment along the Belt and Road (B&R) in particular.