This paper empirically investigates the impact of China's outward foreign direct investment (OFDI) on its export sophistication. Using a provincial-level panel dataset and applying fixed effects and instrumental variable regression techniques, the study fi nds that, on average, OFDI has no signifi cant impact on China's export sophistication. However, after the full sample is divided into different regions, the study fi nds that OFDI has a positive and signifi cant impact on export sophistication in the developed coastal region, but no such impact is observed in the less developed inland regions. Further investigation using a panel threshold model reveals that only when GDP, per capita GDP, human capital, and the research and development intensity of a home economy reach a certain level can OFDI promote export sophistication. The fi ndings suggest that accelerating eco nomic development and increasing absorptive capacity can facilitate the contribution of OFDI to China's export sophistication.
PurposeThe purpose of this paper is to estimate the impact of China's outward foreign direct investment (OFDI) conducted by exporting firms on their productivity.Design/methodology/approachThis study uses two Chinese firm-level datasets. To reduce the bias when merging the two datasets, this study uses a comprehensive link approach to obtain more observations. The propensity score matching method is employed together with the difference-in-difference and difference-in-difference-in-difference approaches to identify the casual effects.FindingsThe study finds that exporting firms become more productive through learning effect via OFDI, and the positive impact of OFDI on total factor productivity materializes very quickly but subject to diminishing return. The study also finds that state-owned enterprises gain less learning effect via OFDI than private-owned enterprises, and firms with higher export intensity or larger size tend to gain less improvement in productivity via OFDI.Originality/valueThis is one of the first studies to investigate empirically the impact of OFDI conducted by exporting firms on their productivity. In particular, the study analyzes three types of firm heterogeneous factors, namely, ownership, export intensity and size, in affecting exporting firms' learning effect via OFDI.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.