Institutional Directionality and Chinese OFDI: A Two-Stage Analysis of Location Choice and Scale : From a Springboard Perspective

다국어 초록 (Multilingual Abstract)

Institutional Directionality and Chinese OFDI: A Two-Stage Analysis of Location Choice and Scale - From a Springboard Perspective - By YU ZHENNA Master of International Trade and Business Graduate School of Kyung Hee University Advised by Dr. Sang-Whi Lee Against the backdrop of restructuring global value chains and the profound evolution of globalization, FDI has become a critical pathway for industrial upgrading and technology diffusion. As key players in emerging economies, Chinese multinational enterprises (CMNEs) exhibit unique international expansion behaviors that align with the 'springboard' perspective. They utilize aggressive FDI to enhance their competitiveness and overcome latecomer disadvantages. However, existing research has not adequately integrated the concept of "institutional directionality"-the distinction between expanding into countries with stronger ("upward") versus weaker ("downward") institutions-into this framework. This study addresses this gap by constructing a two-stage analytical framework to investigate how institutional directionality influences both the location choice (whether to enter) and the investment scale (how much to invest) of CMNEs, while examining the moderating role of host-country natural resource endowments. Theoretically, this research synthesizes the springboard perspective with the concept of the "institutional ladder." Conventional views often treat institutional distance merely as a barrier, but this study argues that for springboard MNEs, it represents a strategic menu of opportunities. "Upward" expansion into institutionally institutionally superior countries facilitates the acquisition of advanced technologies and legitimacy , whereas "downward" expansion into weaker environments offers opportunities to exploit institutional voids or low-cost factors. Based on this, the study proposes that CMNEs tend to enter upward-distant countries to secure scarce assets (Hypothesis 1). However, regarding investment scale, a paradoxical logic is hypothesized: once entered, firms invest less in institutionally advanced markets due to the efficiency of "surgical strike" asset acquisition, but invest more in weaker markets to compensate for high transaction costs and risks (Hypothesis 2). Furthermore, natural resources are expected to amplify the attractiveness of upward entry (Hypothesis 3a), but weaken the constraining effect of institutional directionality on scale (Hypothesis 3b). To empirically test these hypotheses, the study utilizes a dataset of outward FDI by Chinese listed firms across 122 host countries from 2009 to 2023. The analysis employs a two-stage strategy: a population-averaged probit model for location choice and a random-effects Poisson regression for investment scale, utilizing the Inverse Mills Ratio to account for possible selection bias. In the first stage, this suits the binary nature of location choice: whether a firm invests in a country in a given year. Probit models effectively capture the probability structure behind entry decisions. They are widely used in international business research for location analysis. Furthermore, we employ a population-averaged specification. This captures the systemic impact of institutional environments on average entry probability within our large country-firm-year sample. It reduces reliance on individual-level random fluctuations. The second stage focuses on investment scale, defined as capital intensity post-entry. The investment scale variable is characterized by non-negative integers. It also tends toward a right-skewed distribution and over-dispersion. Consequently, traditional linear regression models are unsuitable. We therefore adopt a Poisson regression model. This model handles discrete investment data effectively. It is commonly used in international investment studies to analyze capital commitment and scale differences. The empirical findings provide robust are consistent with the formulated hypotheses. In the first stage, CMNEs exhibit a significant preference for "upward springboard," with positive institutional distance increasing the likelihood of entry. In the second stage, a distinct asymmetry emerges: positive institutional distance is associated with smaller investment scales, while negative institutional distance drives significantly larger capital commitments. This confirms that in developed markets, CMNEs prioritize targeted, efficient asset seeking, while in developing markets, they must commit heavy resources to navigate institutional voids. Additionally, the moderation analysis reveals that natural resources reinforce the appeal of upward entry-making "good institutions plus rich resources" the ideal target-while simultaneously moderating the influence of institutional directionality on investment scale. In summary, this study advances the springboard perspective by elucidating a "dual-path" internationalization strategy. It demonstrates that CMNEs navigate upward and downward paths with distinct logics-prioritizing asset-seeking entry in the former and compensatory resource commitment in the latter. These findings offer managerial implications for balancing institutional upgrading with operational feasibility and shed light on the ways in which CMNEs calibrate their global expansion strategies across diverse institutional environments. Key words ：Outward FDI, Institutional Directionality, Springboard Theory, CMNE Internationalization

목차 (Table of Contents)

• Abstract V
• Chapter 1. Introduction 1
• 1.1 Research background 1
• 1.2 Research purpose 3
• 1.3 Research methods and composition 4
• Chapter 2. Theoretical Background 7
• 2.1 CMNE Internationalization 7
• 2.2 Springboard Theoretical 8
• 2.3 Springboard Internationalization Mechanism Framework 12
• 2.3.1 Logic Based on Amalgamation Capability 12
• 2.3.2 Logic Based on Ambidextrous Capability 13
• 2.3.3 Logic Based on Adaptive Capability 14
• 2.4 Springboard Dynamic Capabilities 16
• 2.5 Institutional Distance Directionality and Outward FDI Decisions 19
• Chapter 3. Hypotheses Development 23
• 3.1 Direction of institutional distance and CMNEs outward FDI location choice 23
• 3.2 How Institutional Distance Directionality Shapes Outward FDI Scale 24
• 3.3 Host country natural resource heterogeneity 28
• 3.3.1 Natural resources and CMNEs outward FDI location choice 28
• 3.3.2 Natural resources and CMNEs outward FDI scale 30
• Chapter 4. Data and methodology 32
• 4.1 Empirical context 32
• 4.2 Data and sample 33
• 4.3 Dependent variables 34
• 4.4 Independent and moderating variables 35
• 4.5 Control variables 39
• 4.6 Estimation 40
• Chapter 5. Results 43
• 5.1 Descriptive statistics and correlation matrices 43
• 5.2 Regression results 46
• 5.3 Robustness tests 1 52
• 5.4 Robustness tests 2 53
• Chapter 6. Discussion and implications 56
• 6.1 Conclusions 57
• 6.2 Theoretical implications 58
• 6.3 Managerial Implications 61
• 6.4 Limitations and Future Research 63
• References 67
• Table Contents
• <Table1> The Evolution of the Springboard Perspective 9
• <Table2> Comparison of Upward vs. Downward Institutional Distance 27
• <Table3> Variable Definitions 40
• <Table4> Descriptive statistics: FDI location 44
• <Table5> Descriptive statistics: FDI scale 45
• <Table6> Regression results: FDI location 50
• <Table7> Regression results: FDI scale 51
• <Table8> Robustness tests 1 52
• <Table9> Robustness tests: FDI location 55
• <Table10> Robustness tests: FDI scale 56
• Chart Contents
• <Figure1> Springboard Internationalization Framework 16
• <Figure2> spiral-up models 18
• <Figure3> Marginal effects on FDI probabilities in two directions 47
• <Figure4> Marginal effects on FDI scales in two directions 48
• <Figure5> FDI probabilities at levels of natural resources 49
• <Figure6> FDI scales at levels of natural resources 49