Governance and the Choice of Entry Mode by FDI Firms Entering China

In the past 20 years, China's economy made a dramatic change. This was likely due to its improved institutional environment. In this study, we use 6 governance indicators, compiled by World Bank, to measure the change in China's institutional environment and to provide some empirical evidence of the linkage between the quality of governance and a firm's choice on entry mode. We determined that improved political stability, regulatory quality and rule of law would induce foreign firms entering China to be more willing to utilize a high-commitment entry mode, and thus, would result in more stable capital investment from foreign organizations.