Peer effects in outward foreign direct investment : evidence from China

Purpose: Most previous research assumes that the outward foreign direct investment (OFDI) decisions of multinational corporations (MNCs) are made independently of the actions or characteristics of their peers. Therefore, the important influence of peer effects on the OFDI strategy is often neglected. The purpose of this paper is to identify two broad categories of peer effects, i.e. learning-based and profit-driven imitations and examine the important influence of peer effects on MNCs’ internationalization strategy. Design/methodology/approach: Using Chinese manufacturing firms as the empirical sample, the authors employ an econometric method (logit regression) to test the relationship between peer effects and an internationalization strategy. Findings: Learning-based and profit-driven imitations are positively associated with a focal MNC’s OFDI decision. Policy uncertainty also positively moderates the relationship between peer effects and the OFDI strategy. Moreover, both peer effects are amplified when a firm is equipped with a dense export network. Originality/value: The study offers researchers and practitioners a detailed view of interorganizational imitation behavior in terms of an internationalization strategy.