Abstract China has enjoyed its economic boom in the past decades. However, the low government efficiency is what hinders the development of economy. It is without doubt that the construction of service-oriented government and effective government cannot be separated from the improvement of government service and the enhancement of its efficiency. Over the past decades, it has become the “new normal” phenomenon that Chinese enterprises continue to respond to the “Going Global” policy, to develop new target markets and to seek for new resources, which turns out to be the new “landing point” of the transformation and development of Chinese firms. Meanwhile, the Outward Foreign Direct Investment (OFDI) of Chinese enterprises relies highly on the Chinese Government. The recent proposition of “One Belt And One Road” strategy provides new challenges and opportunities for Chinese enterprises and government to take this platform for win-win cooperation. Therefore, it is necessary to explore whether the government efficiency will affect the pace of Chinese enterprises’ going global. This paper firstly examines the mechanisms by which government efficiency is able to have impact on the scale of enterprises’ outward direct foreign investment, and proposes two possible effects. The first is known as the direct effect, in which, by improving government efficiency, approval efficiency, information service efficiency and finance efficiency can all be enhanced, thus directly reducing the difficulty of OFDI and immediately influences the enterprises’ decision on whether to conduct OFDI or not; the second is defined as adjustment effect, which illustrates that, by improving local government efficiency, the Chinese domestic investment and economic environment are largely perfected, and may contribute to making enterprises turn to domestic investment, instead of OFDI, which is more risk-taking. Furthermore, the paper makes an attempt to analyze the effect of government efficiency on the quality of OFDI at the theoretical level, and holds that the enhancing of government efficiency will improve the quality of OFDI in terms of geographical distribution, industrial structure and the average scale of M&A project. This paper goes on with an empirical analysis to further verify the mechanisms, using Chinese provincial panel data from 1994-2012. Results support the proposal for both effects mentioned above. In addition, by calculating the net effect within both direct and adjustment effect, the result indicates that the net effect is positive, i.e., with local government efficiency improving, the OFDI scale will be increased as well, revealing that the direct effect is more significant than the adjustment effect. Moreover, the paper creates two dummy variables to represent the three regions with different geography in China, namely, the eastern region, the central region and the western region. The regression result shows that there is a significant disparity within the three regions. The originality of the paper lies in the following three respects. Firstly, and foremost, it innovatively places government efficiency and outward foreign direct investment into the analysis framework, simulates the mechanisms of how government efficiency affects both scale level and quality level of outward foreign direct investment and, for the first time, proposes two effects that leads government efficiency to influence outward foreign direct investment, i.e., the direct effect and the adjustment effect. Secondly, it verifies the mechanisms by using the Chinese provincial panel data from 1994-2012, and modifies the empirical model by adding intersection terms. The empirical analysis result significantly confirms the hypotheses raised from mechanisms and calculates the net effect of both effects, which helps understand that the direct effect is stronger that the adjustment effect and to improve government efficiency results in higher volume of OFDI. Thirdly, to investigate the existence of regional gap of OFDI in China, the paper innovatively introduces two dummy variables to represent regional variables and reaches conclusion that there is regional disparity in China, and both western and central regions lag far behind the eastern region in the “Go global” process.
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