Initiative as Institution

This article investigates how the Belt and Road Initiative (BRI), proposed by China in 2013, influences the participation of Chinese firms in the global value chains (GVCs). More than just an economic strategy, BRI could serve as a substitute for inadequate contract enforcement in cross-border economic transactions between Chinese firms and their foreign counterparts. Using data from Chinese private companies listed from 2008 to 2016 and multiplicative interaction models, this article evaluates the impact of BRI as a policy shock that enhances contract enforcement and encourages Chinese firms’ participation in the GVCs. The results suggest that, following the implementation of the BRI in 2013, private firms with political ties to the government became more active participants in the GVCs, thanks to greater support from the Chinese state in facilitating contract enforcement abroad. The findings imply that BRI, as a state-led economic strategy, can also function as a mechanism that encourages private firms with political connections to expand globally by reducing transaction costs in cross-border trade activities

Business · China · Database transaction · Economics · Emerging markets · Enforcement · Government (linguistics · Institution · Market economy · Political science · Politics · State (computer science · Transaction cost · Value (mathematics · Global trade and economics · International Business and FDI · International Development and Aid · Finance · Law