Abstract
This paper examines the impacts of outward foreign direct investment (OFDI) on the home firm's productivity in an emerging economy. Based on the literature review and findings from this paper of Chinese outward investing firms, we develop a conceptual framework that integrates the resource-based view, industrial organization economics, and institutional view of international business study. In our findings, they show that the integrating model of three aspects have higher explanation than the individual aspect model. We use firm-level data to explain how the firm-specific factors, industrial factors, and national institution factors affect productivity in Chinese OFDI firms. Also, this analysis of firm-level data can provide evidences in the effectiveness of resource using, competitiveness, and policy impact on individual firms.
Highlights
The phenomenal growth of China's outward foreign direct investment (ODFI) provides both challenges and opportunities to researchers (Cui, Jiang, 2010)
According to previous findings of productivity and ODFI, this study argues a number of common approaches to productivity upon FDI, and regard the productivity determinants concluded some FDI factors such as the amounts of outward foreign direct investment (OFDI), and the regions of investment
Based on the discussion above, we develop the following hypothesis: Hypothesis 4: The productivity of home countries undertaken by Chinese OFDI firms is positively related to (a) whether it is supported by five-year plans of government policy; (b) the level of state ownership in the firm concerned; (d) the level of foreign ownership in the firm concerned
Summary
The phenomenal growth of China's outward foreign direct investment (ODFI) provides both challenges and opportunities to researchers (Cui, Jiang, 2010). While there are many studies, have explored the China’s outward FDI and relationship between home country productivity (Haskel et al, 2002). It is often assumed that FDI brings benefits to host country economics through productivity spillovers from multinational enterprises (Nigel & James, 2007). From the host country’s perspective, the primary expected economic benefit, on the contrary, it is interesting to see how home country firms focus on the domestic market, and that special features of OFDI how affect domestic firm’s productivity. Investigating the earlier researchers used the method of econometrics to prove that the relationship between home country productivity and international trade must have been significantly positive or negative (Montagna, 2001; Melitz, 2003). Head & Ries (2003) and Eaton et al (2004) observed that, the more numbers of OFDI countries a firm invested, the higher performance in productivity. We can concern that firms go offshore owing to attaining firm-specific ownership against liabilities of foreignness (Dunning, 1993)
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