Managerial foreign experience and outward foreign direct investment: Evidence from China

Abstract

We examine whether managerial foreign experience facilitates corporate outward foreign direct investment (OFDI) decision. Using hand-collected manager biography data from Chinese public companies, we find that there is a positive association between managerial foreign experience and OFDI. Mechanism analysis shows that returnee managers can improve corporate willingness of risk-taking, and thus promote the probability of OFDI. Moreover, the facilitation effect is greater when firms have managers with foreign experience obtained in the OFDI destination countries. While both foreign work and study experience promote OFDI, the effect is more significant when returnee managers hold senior positions. Lastly, managerial foreign experience is associated with improved performance of outward investments. This study enriches the emerging literature on cross-country knowledge transfer in international business by providing evidence on the economic consequences of managerial experience.