Can the development of e-government make local enterprises more attractive to foreign capital: Empirical evidence from the performance of Chinese local government websites

Abstract

Emerging economies globally, including China, place significant emphasis on foreign direct investment (FDI) and foreign-funded enterprises. In the context of a persistent decline in global transnational direct investment flows, stabilizing foreign capital presents a critical challenge for China and other developing nations. E-government, as a facet of government digitization, has the potential not only to enhance governance efficiency but also to improve the business environment, thereby increasing the appeal of local enterprises to foreign capital. Whether the development of e-government can form an institutional advantage at the enterprise level to attract foreign capital urgently needs in-depth discussion through theoretical analysis and empirical testing. To investigate how e-government development affects the attractiveness of enterprises to foreign capital, this study uses the Chinese Industrial Enterprise Database from 2012 to 2015. Based on the study, e-government can significantly increase the attractiveness of local enterprises to foreign investors; that is, it promotes the inflow of foreign capital and curbs the outflow. This paper employs two-dimensional instrumental variables, and a series of robustness and heterogeneity testing methods to verify the empirical results. Through mechanism analysis, it is found that e-government mainly enhances the attractiveness of enterprises to foreign capital by reducing the uncertainty and sales costs faced by enterprises. The research in this paper has significant practical implications for the development of e-government in China and other developing countries, as well as for further optimizing the business environment, promoting high-level opening-up, and more vigorously attracting and utilizing foreign investment.