The role of regional formal institutions in China's OFDI location choice and firm performance - The moderation roles of international experience and foreign capital utilization

Based on the micro data of Chinese enterprises, this paper examines the effects of regional formal institutional environment in China on the location choice and firm performance of Chinese OFDI, and discusses the roles played by international experience and the foreign capital usage. The results show that regional formal institutional environment of China significantly and positively affects the location choice and performance of Chinese OFDI. Moreover, different regional formal institutions have varied effects. In particular, institutional factors represented by the ‘government and market relationship’, ‘product market’ and ‘factor market’ development play the key role. It is also found that actual FDI utilization and firms’ international experience play positive and significant moderation roles in the institutional effect on China's OFDI, but such moderation effects are constrained to ‘intermediary organizations and legal environment’ as the institutional factor only. Therefore, the policy of improving regional institutional quality can have a positive effect on OFDI and corporate performance.