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Attracting Chinese FDI in Africa : the role of natural resources, market size and institutional quality.

Shan, S. and Lin, Z. and Li, Y. and Zeng, Y. (2018) 'Attracting Chinese FDI in Africa : the role of natural resources, market size and institutional quality.', Critical perspectives on international business., 14 (2/3). pp. 139-153.

Abstract

Purpose – The study aims to examine the effect of natural resources, market size and five major institutional factors (voice and accountability; political stability and absence of violence; regulatory quality; rule of law; and control of corruption) on Chinese FDI in Africa. Design/methodology/approach – This study uses regression analysis on panel data across 22 countries for the period from 2008 to 2014. Findings – Natural resources did not play a significant role in attracting Chinese investments, but market size did. Among the institutional factors, only voice and accountability had a significant and positive effect on attracting Chinese FDI; the effects of rule of law and control of corruption were not significant; and political stability and regulatory quality had a significant and negative effect. Research limitations/implications – Chinese investment in Africa is only a recent phenomenon, and is growing rapidly, further studies should examine factors that are unique to the context such as bilateral political link. Practical implications – African countries that are struggling with improving their poor institutional quality in the short term could effectively attract Chinese investment by reducing investor psychic distance, e.g. establishing a closer political link with China. Nevertheless, in the long term measures of improving institutional quality are important. Originality/value – This study reveals for the first time that what attracts Chinese investment is market size rather than natural resources and different institutional factors of an African country show varying effects on attracting Chinese FDI.

Item Type:Article
Full text:(AM) Accepted Manuscript
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Status:Peer-reviewed
Publisher Web site:https://doi.org/10.1108/cpoib-11-2016-0055
Publisher statement:This article is © Emerald Group Publishing and permission has been granted for this version to appear here http://dro.dur.ac.uk/23873. Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited
Date accepted:20 November 2017
Date deposited:15 January 2018
Date of first online publication:26 January 2018
Date first made open access:26 January 2018

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