Abstract:
The impact of national origin on the sensitivity of multinational firms to human rights and democracy in host countries demands investigation. International business scholars have posited that Chinese outward investors may be indifferent to these host-nation characteristics due to the institutional idiosyncrasies of their home environment. Despite these conjectures, no one has tested the moderating influence of nationality on the relationships between inward foreign direct investment and host-country human rights and democratic governance. Accordingly, this study compares the relative importance of these two locational attributes to the foreign direct investment location decisions of American and Chinese firms. Foreign investors from the United States and China were chosen for comparison due to their predicted heterogeneity in respect for human rights and democracy. Using Generalised Estimating Equation regression analysis for a sample of 51 developing countries over the period 2007–2010, this study finds evidence to suggest that, contrary to expectations, Chinese multinationals prefer host countries in which human rights are protected, whereas investors from the United States show no such tendency. Moreover, a separate analysis of Chinese foreign direct investment in non-financial sectors for a sample of 66 developing countries between 2004 and 2006 further supports a positive and statistically-significant relationship between foreign investment flows from China and host-nation respect for human rights. With regard to the effect of democracy, no significant relationship is found between host-country democratic governance and either American or Chinese foreign direct investment. The results of this study suggest that national origin is influential in multinationals’ location decisions, and that the assumptions surrounding Chinese foreign investors need to be re-examined.