Abstract: Based on transaction cost theory, the paper uses panel data, generalized moment estimation and threshold regression to empirically analyze the impact of different transaction costs measured by the added value of different sectors of the tertiary industry on China OFDI. Results show that transaction costs have significant promoting roles in the OFDI system, and institutional costs has the saving effect which reduces the single exchange cost, so it can promote OFDI; the saving effect has different scales in different time, currently, the power of promoting OFDI by institutional costs is on the wane, as a contrast, the type of exchange costs shows inhibitory effect on the OFDI; there is a threshold effect hidden in transaction cost, when the scale of transaction cost is small, the transaction cost can promote OFDI, while when the scale of transaction cost reaches the certain value, OFDI will be depressed. At present stage, the promoting effect on OFDI is greater than the inhibitory effect. The above conclusions provide a theoretical basis for our country to clearly develop the modern service industry with technology and intensive knowledge, adjust and upgrade the service industry structure. The conclusions also have policy significance for standardizing the OFDI behavior of enterprises and improving the performance of outward foreign direct investment.

Key words: panel threshold, outward foreign direct investment(OFDI), transaction cost