Foreign Shareholders’ Social Responsibility, R&amp;D Innovation, and International Competitiveness of Chinese SOEs

Yuying Zhou,Chu Lei,Alfredo Jiménez

doi:10.3390/su14031746

Foreign Shareholders’ Social Responsibility, R&D Innovation, and International Competitiveness of Chinese SOEs

Yuying Zhou, Chu Lei + Show 1 more

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https://doi.org/10.3390/su14031746

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Abstract

Despite the increasing use of mixed ownership (domestic and foreign shareholders) in Chinese state-owned enterprises (SOEs), the role and performance of foreign ownership is still a controversial topic. In this paper we empirically examine the effects of foreign shareholders’ social responsibility on the international competitiveness of SOEs and the moderating effect of R&D innovation. Drawing on a sample of Chinese listed SOEs with international market operations over the period 2011–2019, we find empirical evidence supporting that foreign shareholders’ social responsibility is effective in enhancing the international competitiveness of Chinese SOEs. We also find that R&D innovation strengthens the effect between foreign shareholders’ social responsibility and enterprises’ international competitiveness. These findings are valid after controlling for robustness and endogeneity factors. Furthermore, we find that the promoting effect of foreign shareholders’ social responsibility on Chinese SOEs’ international competitiveness, as well as the moderating effect of R&D innovation, is more pronounced among Chinese local SOEs, business SOEs, and manufacturing SOEs. The research in this paper contributes to the current debate and deepens our understanding regarding the role and performance of foreign shareholders in the process of mixed-ownership reform.

Highlights

As an essential part of China’s economic development after its reform and opening up, foreign investment in China has undergone a gradual evolution from quantity to quality in both development scale and quality after the pilot start-up stage, rapid development stage, high-level development stage, and new stage of all-round opening up
The variable ICi,t has a mean value of 0.190, which shows that the current international competitiveness of Chinese state-owned enterprises (SOEs) is relatively weak, and there exist certain differences in international competitiveness across different Chinese SOEs
Even after taking endogeneity into account, our results show that a better social responsibility performance by foreign shareholders is associated with stronger international competitiveness of Chinese SOEs

Summary

Introduction

As an essential part of China’s economic development after its reform and opening up, foreign investment in China has undergone a gradual evolution from quantity to quality in both development scale and quality after the pilot start-up stage, rapid development stage, high-level development stage, and new stage of all-round opening up. In the process of Chinese SOEs utilizing foreign capital, problems such as misconceptions about foreign shareholders, poor utilization of foreign capital, and the late priority of foreign shareholders during mixed-ownership reform have partly curbed the performance of foreign shareholders. In this regard, the report of the 19th National Congress of the Communist Party of China clearly states that it is necessary to “deepen the reform of Sustainability 2022, 14, 1746.

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