Research on Institutional Distance and Outward Direct Investment

The institutional quality of home country and host country influences not only the amount but also the performance in outward direct investment. This paper analyzed the institutional quality in host country and home country respectively, as well as the relation between institutional distance and outward direct investment. This paper also studied the impact of formal and informal institution in outward direct investment. The issues such as positive and negative distance in institutional distance; the level of institutional quality; the dynamic institutional distance; the interaction between institution and other factors are also discussed in this paper. Measures such as policy coordination between host country and home country, knowledge of policy and regulation in host countries, localization strategy and social responsibility could help mitigate institutional distance risk in outward direct investment.