How does outward foreign direct investment enhance firm productivity? A heterogeneous empirical analysis from Chinese manufacturing |
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| Institution: | 1. School of Economics, Ocean University of China, 238 Songling Road, Laoshan District, Qingdao 266100, China;2. Asian Development Bank Institute, 3-2-5 Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan;1. The School of Economics and Trade, Hunan University, Shijiachong, Changsha, Hunan 410079, China;2. The School of Economics and Management, Changsha University of Science & Technology, Shijiachong, Changsha, Hunan 410079, China;1. Faculty of Geographical Science, Beijing Normal University, Beijing 100875, China;2. Collaborative Innovation Center for Geopolitical Setting of Southwest China and Borderland Development, Yunnan Normal University, Kunming 650500, China;3. School of Tourism and Geography Sciences, Yunnan Normal University, Kunming 650500, China;1. Chongqing University, China;2. University of Nottingham, United Kingdom;3. Fudan University, China;4. Agricultural Bank of China, Zhejinag Branch, China;5. School of Contemporary Chinese Studies, University of Nottingham, United Kingdom;6. School of Economics and Business Administration, Chongqing University, China |
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| Abstract: | Using an original linked firm-level panel data from Chinese manufacturing firms over the period 2002–2007, this paper examines how outward foreign direct investment (OFDI) led productivity increase of parent firms (known as the own-firm effect) changes over firm heterogeneity. Conducting propensity score matching (PSM) techniques and differences-in-differences (DID) analysis, we find strong and robust evidence that the first OFDI promotes parent firm's productivity and this effect varies substantially with the firms' characteristics. In particular, firm's absorptive capacity is essential for the own-firm effect, and the absorptive capacity related with the product innovation is more important than that of the process innovation for the own-firm effect. Also, OFDI strategies for obtaining advanced technology and investing in developed countries significantly strengthen the own-firm effect, whereas, government supports have no significant impacts on the own-firm effect. |
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