The Impact of Host Country Institutional Environment on the Overseas Performance of Chinese Firms: Empirical Evidence from “Belt and Road” Countries

Abstract

Given the growing outward investment of Chinese firms in Belt and Road countries, understanding how host country institutional environments shape overseas performance is of critical importance. This study investigates the impact of formal and informal institutional factors including regulatory quality, rule of law, political stability, and cultural distance on the profitability and growth of Chinese multinational enterprises operating in Belt and Road partner countries. Drawing on institutional theory, the institutional environment is conceptualized as a multidimensional construct and its differential effects on performance are examined. Using panel data on Chinese listed firms with overseas operations in Belt and Road countries, fixed-effects regression models are employed to test the relationships. The empirical results indicate that higher regulatory quality and stronger rule of law in host countries are positively associated with firm performance, while excessive political instability and greater cultural distance exert negative effects. Moreover, the influence of institutional distance varies across ownership types and industry sectors. These findings extend the institutional perspective to the context of China’s Belt and Road initiative and provide practical implications for managers making location decisions and for policymakers seeking to support outward investment. The study contributes by offering systematic evidence on how host country institutions condition the success of Chinese firms’ internationalization in emerging and developing economies.