Abstract

This paper investigates the role of investment experience in Chinese outward direct investment based on deal-level data from FDI Intelligence and Dealogic data. We use gravity model to test the Chinese firm’s risk attitude and how this attitude is adjusted by firm’s previous investment experience and Bilateral Investment Treaty (BIT). The results show that, first, investment experience has a stimulating effect on s (next) investment scale. This stimulating effect is positively correlated with the concreteness of the investment experience; Second, China’s ODI still has an appetite. Firms tend to investing in countries of high corruption risk, government efficiency risk, political stability risk, regulation quality risk and rule of law risk, but not voice and accountability risk; Third, previous investment experience has a moderating effect on risk preference. That is to say, firms with richer experience tend to be more risk averse; Finally, the existence of investing partner does have a positive moderating effect on firms’ risk preference making firms more risk averse, while the BIT has a stronger but negative moderating effect on risk preference, making firms more aggressive, especially for resource industry. It is inferred that BIT provides a solid safety net for Chinese resource companies since they’re mostly state-owned and have keen relationship with Chinese government.

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