Abstract
Existing studies on the Belt and Road Initiative (BRI) primarily explain its impact on foreign trade, foreign direct investment and economic development of the countries concerned, whereas its impact on the performance of outward foreign direct investment (OFDI) enterprises has rarely been examined. By considering the BRI as exogenous policy shock, this paper analyzes the mechanism and impact of the BRI on the research and development (R&D) investment of China’s OFDI enterprises investing in countries along the Belt and Road. With propensity score matching and a difference-in-difference approach, it tackles the endogeneity problem caused by self-selecting into the BRI enterprise group. The estimates indicate that BRI has not effectively promoted the R&D investment of OFDI enterprises, but plays an inhibitory role in the short term, and the marginal effect increases firstly and then decreases. Further mechanism analysis shows that the BRI leads to the addition of overseas revenue and the reduction of return on assets, which are the main reasons for the decrease of the R&D investment. In addition, the ownership heterogeneity analysis finds a higher negative effect on the state-owned enterprises, while a smaller effect on non-state-owned enterprises.
Highlights
Implementing the Going Out Strategy is of great significance for China’s enterprises to participate in overseas competition and cooperation, develop new markets, accelerate innovation, and realize the upgrading of industrial structure and sustainability development [1]
In order to examine the impact of the Belt and Road Initiative (BRI) on the research and development (R&D) investment of the outward foreign direct investment (OFDI) enterprise, we refer to Kang et al [13] and attempt to match each OFDI enterprise investing in the node countries with an OFDI enterprise not investing in the node countries that had the most similar propensity score
The BRI provides a new platform for enterprises to participate in international cooperation and competition, which has been designed to encourage the economic growth of the participators
Summary
Implementing the Going Out Strategy is of great significance for China’s enterprises to participate in overseas competition and cooperation, develop new markets, accelerate innovation, and realize the upgrading of industrial structure and sustainability development [1]. This paper draws on previous research, taking the impact of BRI on the R&D investment of OFDI enterprise as a quasi-natural experiment, and uses propensity score matching (PSM) and a difference-in-difference (DID) approach to evaluate the impact It investigates the impact mechanism, ownership heterogeneity and takes the robustness tests. The main contributions of this paper are as follows: (1) Unlike previous literatures focusing on countries, this paper studies the effect of BRI from a micro perspective, and investigates the impact of BRI on the R&D investment of OFDI enterprises; (2) Since the BRI is a flexible initiative and its implementation period is not long, there is rare direct data compiled now. The rest of this paper is as follows: Section 2 elaborates the literature review and theory foundation, Section 3 introduces model and data, Section 4 provides the empirical findings and robustness tests, and Section 5 offers conclusions
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