FAN Zhaobin,YANG Jun:International Emigration Network,Transaction Cost and Outward FDI

Abstract：With the fast development of international migration and direct investment,the relations between international migration network and FDI have been examined by growing literatures in recent years.However,few literatures examine how international emigration network influences outward FDI in origins of immigrants.From the perspective of transaction cost,this paper first builds a model to examine how international emigration network influences outward FDI of origins of immigrants in a context of heterogeneous firms.The results show that due to the failure of formal institutions,the internal business governance of international emigration network can promote the executive efficiency of international business contract and reduce the transaction cost of undertaking outward FDI.Therefore,outward FDI in origins of immigrants is accordingly stimulated.Using China's data of overseas Chinese and China's outward FDI in 24 countries from 2003 to 2012,this paper tests these predictions derived from the theoretical model on the basis of gravity equation.The empirical results show that the overseas Chinese network significantly facilitates China's outward FDI,and the closer to China the overseas Chinese network is,the more significantly it facilitates China's outward FDI.

Key words： International Emigration Network    Transaction Cost    Firm Heterogeneity    Outward FDI

source:Finance & Trade Economics ,No.4,2015