The Impact of Uncertainty on Firms’ Outward Foreign Direct Investment

This study investigates the impact of policy uncertainty on Chinese firms’ outward foreign direct investment (OFDI) from 2003 to 2023, focusing on the interaction between U.S. trade policy uncertainty (TPU) and China’s economic policy uncertainty (EPU). Using a Poisson pseudo–maximum likelihood (PPML) estimation and incorporating both firm-level and host-country–level controls, the analysis reveals that dual policy uncertainty exerts a significant and robust effect on OFDI probability and scale. These findings contribute to the literature by elucidating the mechanisms through which multiple sources of policy uncertainty jointly shape cross-border investment strategies, offering new insights into risk management and global market reallocation under uncertain environments.