Bu, W.

Cai, H.

Guney, Y.

English

Middlesex University Research Repository

Static & Dynamic Approaches Testing Eclectic Paradigm: Evidence of EU Firms’ Investment Decisions in ChinaAbstract: This paper examines the determinants of European Union (EU) foreign direct investment (FDI) in the Chinese market using a new dataset for 692 EU firms from the National Bureau of Statistics of China for the period between 1998 and 2009. It attempts to evaluate the major international business theories to identity the variables affecting the EU FDI inflows to China. The study adopts both static and dynamic panel data analyses and uses the system-GMM estimation method that accounts for the endogeneity (i.e., simultaneity and heterogeneity) problem. We find that FDI is positively linked to firms’ innovation and export intensity levels. However, some factors such as technology, personal share ownership and profitability are negatively associated with FDI. In addition, the findings imply that the association of FDI with firm size and research and development intensity is non-linear. The findings have important implications for practitioners and policy making. Keywords: EU Firms; China; Foreign Direct Investment; Eclectic Paradigm; GMM; Dynamic Panel Data Analysis; OLI.1

Static & dynamic approaches testing eclectic paradigm: evidence of EU firms’ investment decisions in China

https://repository.mdx.ac.uk/download/5252a900db5576a0464a8aaecca7815a8db7dfc4eca58ba424534c7d5488f359/20850/2015%2C%20CEA%20Static%20%26%20Dynamic%20Approaches%20Testing%20Eclectic%20Paradigm%2C%20Evidence%20of%20EU%20Firms%E2%80%99%20Investment%20Decisions%20in%20China%20.docx

Static & dynamic approaches testing eclectic paradigm: evidence of EU firms’ investment decisions in China

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