The Impact of Cultural Distance on Corporate OFDI: The Moderating Role of Digitalization

Jing Xu¹ , anan Yu² , QingHua Zeng³

Section:Research Paper, Product Type: Journal-Paper
Vol.12 , Issue.4 , pp.18-25, Dec-2024

Online published on Dec 31, 2024

Copyright © Jing Xu, YuanYuan Yu, QingHua Zeng . This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 

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Abstract :
Outward Foreign Direct Investment (OFDI) has become a crucial means for companies to expand into international markets, acquire resources, and enhance competitiveness. However, the practice of OFDI inevitably encounters challenges brought about by cultural differences. This paper conducts an empirical analysis based on China’s OFDI in 30 countries from 2015 to 2021, aiming to explore the specific impact of cultural distance on China’s OFDI. The empirical findings reveal that: 1) Cultural distance has a significant negative impact on China’s OFDI, with investment scale being notably restricted in countries with larger cultural differences; 2) Digitalization plays an important moderating role in this relationship, as higher levels of digitalization can mitigate the adverse effects of cultural distance on investment, thereby facilitating the smooth execution of OFDI. This study provides valuable insights for multinational enterprises in making investment decisions across different cultural contexts.

Key-Words / Index Term :
OFDI; Cultural Distance; Digitalization; Moderating Effect

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