Outward Foreign Direct Investment Research Articles

Will Environmental Regulations lead to China's outward Foreign Direct Investment?: A Quasi Natural Experiment Based on China's Carbon Emission Trading Pilot Policy

Foreign direct investment (OFDI) is an important part of China's "going global" strategy. With the continuous expansion and rapid development of OFDI in China, domestic environmental problems are becoming increasingly severe. Therefore, China has established a pilot policy of Carbon Emission Trading System (ETS) to address environmental issues. This article takes the implementation of ETS pilot policies as a quasi natural experiment, uses the double difference method (DID model) to empirically test whether ETS pilot policies will lead to OFDI, and uses the composite control method for robustness testing to supplement and expand the conclusions of the DID model. In addition, incorporate the "Pollution Shelter Hypothesis" and "Porter Hypothesis" into the same framework to explore the impact mechanism of ETS pilot policies on OFDI. Based on the conclusions drawn, it is recommended to further improve the design of carbon trading systems in pilot areas and establish a national carbon emission trading system to enhance the quality of China's outward foreign direct investment.

Regional innovation ecosystem and local firms’ outward foreign direct investment: an empirical study based on symbiosis perspective

ABSTRACT ‘Ecological symbiosis’ depicts the phenomena of dynamics, interconnection and coevolution of participants within an ecosystem. The concept has been widely applied in recent years to describe the theory framework of ‘Regional Innovation Ecosystem’ (RIE). This study has two goals. The first is to clarify the formation of ‘Regional Innovation Ecosystem’ (RIE) from an ‘ecological symbiosis’ perspective. The second is to explore the impact of RIE on ‘Outward Foreign Direct Investment’ (OFDI) in emerging economies. We construct an evaluation system for RIE based on a dataset of Chinese cities from 2009 to 2019 and calculate the symbiosis index of RIE using the entropy method. Our finds identify the determinants in the formation of RIE and depict the spatial heterogeneity characteristics of Chinese RIEs. Empirical evidence indicates that RIE symbiosis significantly promotes OFDI by local firms, especially technology-seeking OFDI. Implications of innovation policy and strategic management are discussed, such as high-tech zone construction, technological innovation atmosphere, government-industry-university collaborative innovation strategy and strategic overseas investment layout.

Analysis of the impact of China's OFDI on China's export trade

This article aims to analyze the impact of China's outward foreign direct investment (OFDI) on China's export trade. In theoretical analysis, the motives behind China's OFDI were explored, including seeking resources, expanding the market, enhancing technology and management capabilities, and promoting enterprise internationalization. In terms of positive impact, the positive impact of OFDI on expanding export markets, enhancing product competitiveness, and optimizing industrial structure was discussed. However, it also pointed out negative impacts such as backflow effects and trade protectionism. By taking Huawei's investment in the African market as a case study, this paper analyzes its impact on expanding export markets, upgrading technology, increasing export added value, and driving the development of related industries. In the analysis of influencing factors, multiple factors such as policies, markets, and industries were mentioned. Finally, policy recommendations for the development of OFDI from the perspectives of government, enterprises, and industry were proposed.

Outward foreign direct investment operation modes and reverse technology spillovers: Implications for the quality of economic growth

This study delves into the nuanced relationship between China's outward foreign direct investment (OFDI) and the enhancement of economic growth quality, with a focus on the reverse technology spillover effect. Our findings reveal that OFDI contributes significantly to the efficiency and sustainability of economic growth. Notably, we observe a time-lag effect in the positive impact on growth quality, indicating a delayed manifestation of reverse technology spillovers. Furthermore, heterogeneity analysis suggests that OFDI in high-economic-level host countries, by firms with fewer branches and those in trade sales, enhances the quality, efficiency, and sustainability of China's economic growth, albeit with limited stability impact. Additionally, we uncover a mediating effect wherein OFDI-induced scale expansion elevates domestic human capital levels and research and development intensity, narrows the technology gap, and substantially increases the quality of China's economic growth. This research not only sheds light on the strategic value of China's OFDI in global economic dynamics, but also offers actionable insights for policymakers and businesses to harness OFDI for sustainable and quality-driven economic advancement.

Evaluating the impact of OFDI on the growth quality of industrial firms: A dual-perspective analysis from China

This study addresses a key question: Does outward foreign direct investment (OFDI) by Chinese firms improve the quality of economic growth? We explore this question using a dataset of over 250,000 industrial firms from 2009 to 2013, employing a propensity score matching method. First, our analysis shows that OFDI broadly enhances the quality of economic growth. However, when control variables are taken into account, their influence on growth efficiency appears to be inhibitory. Second, firms engaged in OFDI have a markedly positive impact on the quality of their economic growth compared to non-OFDI firms. Third, our investigation into firm heterogeneity reveals that OFDI firms that invest in developed countries and focus on trade sales benefit significantly from the quality of their economic growth, regardless of the depth of investment. These insights provide a critical empirical lens for understanding Chinese firms' OFDI strategies and a valuable reference for shaping China's path towards a ‘quality’ economy.

Does the quality of bilateral investment treaties matter for outward foreign direct investment?

Bilateral investment treaties (BITs) have been attracting the attention of policymakers with an interest in hosting foreign direct investment (FDI) to promote economic growth. Studies on the impacts of BITs on FDI inflows have produced mixed results. Unlike many studies, this research considers the quality of BITs. The analysis of FDI locational choices of Chinese multinational enterprises reveals significantly positive impacts of high-quality BITs. Furthermore, BITs exhibit a significantly amplified influence on the FDI of multinational corporations upon their implementation, in contrast to when they are initially signed. Additionally, private enterprises are more inclined towards engaging in FDI with nations possessing high-caliber BITs than state-owned enterprises. These findings suggest policymakers prioritize the quality of BITs and guarantee a seamless transition into effect after their signing, rather than solely focusing on their establishment.

Financial policy competition neutrality and the efficiency of outward foreign direct investment

Outward foreign direct investment is an important way for enterprises to participate in international economic cooperation and competition and to build a global “community of interest” and “community of destiny”, and it has become a key issue of concern and research in the academic world. However, existing studies have paid less attention to the willingness or motivation mechanism of OFDI, especially the lack of in-depth research on which motivational factors can drive enterprises to implement OFDI and effectively improve its efficiency. Therefore, based on the capital level perspective, this paper empirically finds, with empirical evidence from Chinese listed multinational corporations from 2009 to 2022, that competitive financial policy neutrality significantly improves OFDI efficiency; at the same time, the capital level strengthens such a facilitating mechanism. The findings provide practical guidance for the government to pay sufficient attention to financial policy competitive neutrality and perceive the incentives of firms' outward investment.

Unleashing the spillover potential: Exploring the role of technology-seeking investment in driving green innovation of host countries

The integration of green development and innovation has become a critical strategy for transforming China's energy-intensive economic growth model. This study investigates the heterogeneous impact of technology-seeking outward foreign direct investment (TSOFDI) for promoting green innovation development (GID) by examining Chinese provinces as the empirical units. Our study extends the measurement models of GID by considering both productivity and output, proposing a novel method for selecting TSOFDI projects. The empirical findings indicate significant regional disparities in the GID, with the eastern region leading in both green productivity and green output. Significantly, our study establishes a non-linear correlation between TSOFDI and GID, suggesting that the green spillover effect is contingent on the level of fiscal autonomy and environmental regulation. In conclusion, it is necessary to increase TSOFDI projects and improve investment quality. The government should guide the innovative achievements and high-quality talents from the eastern regions to flow into the central and western regions. Additionally, governments at all levels should dynamically adjust revenue and expenditure, maintaining a reasonable fiscal autonomy and a stringent environmental regulation to fully unleash the promoting role of outward investment in green innovation.

THE IMPACT OF ECONOMIC POLICY CHANGE ON OUTWARD FOREIGN DIRECT INVESTMENT: EVIDENCE FROM CHINA’S INVESTMENT IN CANADA

The resurgence of anti-globalization has made multinational companies concerned about the impact of host countries’ economic policy change on outward foreign direct investment (OFDI). However, existing studies mainly focus on improving a host country’s institutional environment but ignore the impact of anti-globalization policies. This paper aims to complement this line of research by considering the effect of one-time economic policy shock on OFDI. In particular, using a unique dataset, this paper empirically investigates the effect of Canada’s review policy on investments by Chinese state-owned enterprises (SOEs). The results suggest that an intensified review policy effectively discouraged Chinese SOEs from investing in Canada. However, as a coping strategy to the review policy, Chinese SOEs continued to invest in Canada by adding more funding to the existing projects, establishing new businesses or investing in small-scale deals.

Decomposition of Extensive and Intensive Trade Margin Impacts of Chinas Agricultural OFDI

Economic theory indicates that some ambiguity in the relationship between outward foreign direct investment (OFDI)and trade. This paper estimate the impact of OFDI on the extensive and intensive agricultural import margins of at HS 6-digit commodity level over the sample period from 2012-2020 with the top ten trade partners. We find that standard gravity variables provide good explanatory power for bilateral trade on extensive margin. The empirical results show that the scale of OFDI has a positive impact on the total imports of agricultural products by diversifying product varieties rather than increasing the price of agricultural products, i.e. the impact of OFDI is concentrated exclusively on the extensive margin of China agricultural imports rather than intensive margin. Importantly, based on specific categories of agricultural products, our results suggest that OFDI almost works on food processing and animal products. Additionally, in order to further investigate the motivation of China`s agricultural OFDI, we construct expanded gravity model. The empirical results show that agricultural-related OFDI exhibits characteristics of seeking labor-intensive factors. Overall, our results support that OFDI promotes the diversification of China`s agricultural imports and contributes to the improvement of the welfare of Chinese residents.

Outbound tourism and outward foreign direct investment

Malik and Latif (2021, 2023) have conducted empirical research that demonstrates a positive relationship between Chinese outbound tourism and China's outward foreign direct investment. However, their studies possess significant flaws. Firstly, they fail to account for the heteroscedasticity of random errors, yielding flawed statistical inferences. Secondly, the control variables lack bilateral attributes between countries and overlook time-fixed effects, resulting in omitted endogeneity. Thirdly, their regressions inadvertently exclude a substantial number of observations due to missing values of the independent variable, introducing sample selection biases. This article aims to address these concerns by reanalyzing the empirical data and using a series of econometric methods to handle endogeneity issues. Our findings indicate that Chinese outbound tourism does not significantly influence China's outward foreign direct investment.

Outward foreign direct investment and carbon emissions in the home country: evidence from China

Outward foreign direct investment and carbon emissions in the home country: evidence from China

Research on the Impact of International Public Opinion on China's Outward Foreign Direct Investment—A Case Study of Countries along the Belt and Road

Research on the Impact of International Public Opinion on China's Outward Foreign Direct Investment—A Case Study of Countries along the Belt and Road

Research on the Influence of FDI on China’s Economic Innovation Development

Foreign direct investment (FDI) and outward foreign direct investment (OFDI) are the primary methods through which capital moves internationally. They serve as significant conduits for technological spillover, which is vital for the progress of countries and regions. Through the combined impact of the growth in foreign direct investment and the two-way flow of FDI, China may enhance its access to various production resources, including labor, capital, and energy. Additionally, this enables China to improve the distribution of intangible assets such as knowledge and technology. Consequently, there is an urgent need to establish and implement a strategy that prioritizes innovation-driven development.This study utilizes China’s provincial panel data from 2000-2020 to examine the relationship between the expansion of foreign direct investment (FDI) and the level of innovation. The regional innovation index is used as the dependent variable, while the FDI scale is used as the independent variable. Additionally, a model is employed to test the impact of China’s FDI scale expansion on regional innovation capacity. Simultaneously, this study takes into account the disparities in development between the eastern region and the central and western regions, as well as the influence of the Pilot Free Trade Zone policy. Consequently, the sample is further categorized into the eastern region, central region, and western region for a more detailed analysis. Relevant countermeasures are provided based on the results of the empirical analysis mentioned above.

Outward foreign direct investment and carbon emissions in the home country: evidence from China

Outward foreign direct investment and carbon emissions in the home country: evidence from China

Analysis of Investment Policies in China and the U.S. and the Impact of FDI on China’s Economy

With the acceleration of the globalization process and the increase in international links, global trade and transnational investment are growing rapidly, and a clear and sound investment policy system can provide clear guidance and support to domestic enterprises and investors, while also influencing investment decisions and willingness to cooperate of other countries or regions. This paper presents a concise summary of the investment policies of China and the United States. It highlights that the United States’ investment policies primarily consist of outward foreign direct investment (OFDI) policy and the safeguarding of domestic industries and capital, while China’s focus remains on attracting foreign investment, with continuous OFDI policy improvement. This paper also analyzes the positive impacts and risk challenges of FDI on China’s economy. FDI generally promotes China’s economic growth, provides employment opportunities, improves the quality of labor, promotes technological progress, and enhances innovation, but it also faces a series of problems, especially the negative side of economic stability, market competition, and coordinated social development. Improvements in all these issues require timely adaptation and guidance from national investment policies.

Institutional distance and Thai outward foreign direct investment

Institutional distance and Thai outward foreign direct investment

Sister‐city Ties and Chinese Outward Foreign Direct Investment: A Spatial Econometric Analysis

AbstractThis paper employs dynamic spatial econometric methods to analyze the impact of the sister‐city relationship on Chinese outward foreign direct investment (OFDI) using a linked country‐level dataset from 2003 to 2016. The results show strong and robust evidence that the sister‐city relationship has been a crucial OFDI location determinant in host countries and their neighbors. Specifically, the sister‐city tie between China and the host country has stimulated Chinese OFDI in host countries. Moreover, Chinese OFDI in host countries would be reduced if China concluded sister‐city ties with their neighbors to which we refer as the neighboring effect. Further mechanism tests show that sister cities have promoted OFDI in host countries via four channels: reducing political risk, decreasing information asymmetry, narrowing institutional distance, and mitigating cultural differences. This tendency for sister‐city links to promote OFDI has varied substantially depending on OFDI entry modes (i.e., greenfield or cross‐border mergers and acquisitions), motivation (i.e., resource‐, market‐, technology‐, or efficiency‐oriented OFDI), and Sino–foreign geographical relationships (i.e., Belt and Road Initiative countries or other countries).

Financial determinants of outward foreign direct investment: Evidence from India

Financial determinants of outward foreign direct investment: Evidence from India

Investing Abroad, Transforming at Home: An Empirical Study of Outward Foreign Direct Investment and Korean Manufacturing's Servicification

Investing Abroad, Transforming at Home: An Empirical Study of Outward Foreign Direct Investment and Korean Manufacturing's Servicification