The Nexus of Chinese OFDI Innovation and Entrepreneurship in Europe: A True Fixed Effect Stochastic Analysis

Abstract

In this study, we model economic factors affecting foreign direct investments (FDI）together with research and development spending (R&D), and factors contributing to the opening of new businesses (entrepreneurship). The study used a true fixed effect stochastic efficiency model to assess the efficiency of Chinese outward foreign direct investments (OFDI) in 36 European countries from 2003 to 2016. In the time of the One Belt One Road policy which is expected to be the next phase of the Chinese “Go Global” programme, understanding what drives the surging level of direct investment by China in Europe is timely and pertinent. The results indicate that research and development (R&D) alone is insufficient to attract Chinese FDI. By contrast, the efficiency of new entrepreneurship in Europe is comparatively self-evident in its importance to the attraction of Chinese investment.