Sustainable FDI and comparative advantage for product export survival: a developing countries perspective

Abstract

Establishing stable export relations is significant for developing countries to realize industrialization through exporting manufactured products. Based on the export data of 100 developing countries on the product level from 1999 to 2015, this paper empirically explores the relationship between FDI and product export survival of the host country using the survival analysis model. The estimations show that FDI is conducive to the extension of the export duration of domestic products, and this effect is more evident in products with comparative advantages. Mechanism inspections prove that FDIs extend the export duration of products by improving their quality. To overcome endogenous problems, this paper establishes instrumental variables of FDI based on population and geographical factors. The results of the two-stage least square regression support the conclusions derived from the benchmark regression. This paper provides new empirical evidence for the role of FDI in export promotion and resource allocation.