A merry host makes bolder guests: An analysis of cross‐border investment choices of Chinese firms

This article explores the influence of a host country's conditions on foreign equity investment decisions made by China‐based firms using the assumptions of the institutional theory and transaction cost approach. We use multinomial logit regression to analyze a sample of 1,018 cross‐border investments by Chinese firms categorized into majority acquisitions, minority acquisitions, joint ventures (JVs), and venture capital. According to our findings, Chinese investors prefer to conduct foreign direct investment in the same industry. This, in turn, highlights their desire to gain market influence and learn or obtain strategic knowledge and resources. Furthermore, taxation is proved to encourage the establishment of foreign JVs. The interaction between the host country's tax levels and majority acquisitions in the same industry reveals the concern of Chinese investors with after‐tax returns and influence in the new market.