International friendship cities, regional government leaders, and outward foreign direct investment from China

This study investigates an important yet overlooked phenomenon regarding the international friendship city (IFC) as a sub-national diplomatic relation that links host country cities sharing similarities. We theorize IFC relations as a proxy for an important institutional instrument for regional governments to facilitate outward foreign direct investment (OFDI). Drawing on the institution-fostering view, we argue that the greater the extent to which local governments become involved in developing IFCs, the better they are able to employ this instrument to foster OFDI. We further argue that the effectiveness of this instrument relies on the characteristics of regional leaders. The fostering effects of IFC development are stronger when regional leaders are at the later stage of their tenures and when they retain their positions. An analysis of 967 IFC relationships developed by 31 Chinese provincial governments with 102 countries supports our hypotheses.