Outward Foreign Investment Research Articles

Firm interconnectedness and resilience: evidence from the Italian manufacturing

Abstract This article explores how firm interconnectedness determines firm-level resilience. We argue that firms that engage in outward foreign direct investment are more interconnected, and therefore better equipped to deal with structural and economic shocks, than firms that are not engaged in outward foreign investment. Interconnectedness is measured along two dimensions; cross-border firm linkages and embeddedness in interconnected regions. We use a sample of 13,000 Italian manufacturing firms during the period 2008–2011. We find a positive association between firm interconnectedness and resilience. Moreover, we find the firms that operate in more interconnected regions to be more resilient than firms that operate in relatively isolated regions. Our results offer new insights into the complex interaction between firm and regional interconnectedness.

Relational assets, environmental uncertainty and internationalization speed of Chinese multinational enterprises

PurposeHow to support the rapid internationalization of multinational enterprises (MNEs) is a hot topic in academia and industry. The main purpose of this work is to study the role of relational assets (R-assets) in promoting the speed of internationalization of MNEs, and to explore the moderating effect of environmental uncertainty (institutional environment and industry environment) on the relationship between R-assets and internationalization speed of MNEs.Design/methodology/approachThis study uses the outward foreign investment data of China’s A-share listed enterprises from 2009 to 2021, and employs the Cox proportional hazards model to empirically test the research hypothesis.FindingsThe empirical results revealed that R-assets can promote enterprise internationalization speed. In addition, the study also finds that the institutional uncertainty of host countries weakens the promotion effect of R-assets on internationalization speed of MNEs, while the industry uncertainty strengthens the promotion effect of those. Heterogeneity analysis illustrates that, compared with state-owned enterprises, non-state-owned enterprises have a more significant effect on the above conclusions.Originality/valueThis study enriches the literature on internationalization speed of MNEs by focusing on the determinants of internationalization speed through R-assets. From the perspective of knowledge, the work also provides a theoretical reference whereby MNEs can use host country R-assets to accelerate knowledge acquisition and then internationalization practice. In conclusion, this study provides valuable insights for managers aiming to develop effective strategies through R-assets to achieve rapid internationalization, contributing to an emerging literature stream on catch-up for emerging-market MNEs.

How does Cultural Distance Affect Chinese Companies’ Outward Foreign Investment? Evidence from the Belt and Road Initiative

How does Cultural Distance Affect Chinese Companies’ Outward Foreign Investment? Evidence from the Belt and Road Initiative

A Study on the Impact of Enterprise Digital Evolution on Outward Foreign Investments

A Study on the Impact of Enterprise Digital Evolution on Outward Foreign Investments

Outward foreign investment performance, digital transformation, and ESG performance: Evidence from China

This study examines the impact of outward foreign direct investment performance (OFDI/OFIP) on digital transformation (DT) and determines how environmental, social, and governance (ESG) performance mediates this relationship. For this purpose, we employ a panel regression model, mediation effect tests (the Sobel test, a bootstrap test, and variable replacement test), and endogeneity analyses (2SLS and GMM method). We also evaluate China's accelerated depreciation of fixed assets policy (ADP) by using a difference-in-difference (DID) model, parallel trend test, propensity score matching (PSM)-DID model, quantile DID model, and bootstrap test. We use the CSMAR database for Chinese OFIP, and perform text and word frequency analysis to obtain the DT score and the Huazheng ESG ratings index for the ESG Performance during the period 2010–2020. (1) Based on the results, OFIP has a significant positive impact on firms' DT, with ESG performance strengthening this relationship. (2) Meanwhile, the ADP restrains the DT and OFIP of high-tech firms in China. These findings provide practical implications for companies aiming to improve their long-term sustainability and competitiveness and obtain a better understanding of the relationship between OFIP, DT, and ESG performance. It is hoped that the findings will be used as a reference for expanding firms' overseas investments, driving DT, and enhancing ESG performance in emerging economies.

How does outward foreign direct investment affect enterprise green transition? Evidence from China

The international investment literature consistently indicates that enterprises, functioning as pivotal components of the economic system, engage in diversified outward foreign investment activities, thereby catalyzing the transition towards a greener and more sustainable economy and society. Based on the overseas investment data of Chinese listed companies from 2009 to 2019, this paper adopts a comprehensive approach comprising the two-way fixed effects model, propensity score matching technique, and difference-in-differences set up to evaluate the impact of the enterprise's overseas investment quantity and decision-making of host countries on green development. The findings explore that an increase in outward investment quantity facilitates the enterprise's green transition, which withstands robustness testing, including the decomposition of the green transition index, adjustments to the sample timeframe, and exclusion of corporate samples from top-tier cities. Such promoting effects are more pronounced among listed companies investing in low- and middle-income countries, as well as those located in provinces aligned with the Belt and Road Initiative in China. Further, an enterprise's overseas investment decision-making by the proposal of the BRI has exhibited a substantial and enduring enhancement of green development. This discovery underscores a pragmatic trajectory for the enterprise's green transformation, driven by proactive engagement in high-level openness.

Outward foreign investment by transnational entrepreneurs: Insights from emerging economies

AbstractThis research considers how transnational entrepreneurs in emerging economies identify and develop opportunities for investment into international ventures. Specifically, this study seeks to identify common drivers for outward investment by transnational entrepreneurs from their country of origin (Brazil and India) to their adopted country (the US). Findings indicate three common drivers of this type of internationalization: formal education, effectual logic, and the leveraging of perceived market differences. Furthermore, the data show that entrepreneurs prefer a gradual process of investment rather than a large‐scale initial investment during the exploitation of international opportunities in the adopted country. The results of this study have important practical implications and are valuable additions to the scholarly understanding of the growing field of transnational entrepreneurship.

The impact of country risk on OFDI : empirical analysis based on cross-border panel data

ABSTRACT Based on the cross-border panel data of China’s outward foreign direct investment (OFDI) from 2011 to 2018, the fixed-effect model (FE) and two-stage least squares (2SLS) are applied in this article for the influence study of country risk on OFDI and the risk mitigation of export credit insurance. It is found that there is a certain negative impact on China’s OFDI from country risks of the host country. From the perspective of insurance and risk management, export credit insurance plays a certain role in risk avoidance for China’s outward foreign investment enterprises. Overseas enterprises can take options from export credit insurance to avoid risks.

An Analysis of the Capitalization Potency of ‘Value-Investment Opportunity’, arising from Global Recessionary Pressure through the Regulation of Outward Foreign Investment Policy by India with Comparative reference drawn to China

An Analysis of the Capitalization Potency of ‘Value-Investment Opportunity’, arising from Global Recessionary Pressure through the Regulation of Outward Foreign Investment Policy by India with Comparative reference drawn to China

Problems of attracting domestic investments in Ukraine during war

The article states what the internal and external investments are, examines the essence of internal investment and reveals its main components. Considered the importance of shifting emphasis from outward foreign investment to inward investment for achieving economic stability and growth in the face of fullscale invasion. At the same time, the relationship between internal and external investment is presented. The main problems of domestic investment at the time of a full-scale invasion and possible ways to solve them are studied. It is indicated what kind of economic policy should be built in the period of constant threats and instability. The positive and negative features of investing in the economy of Ukraine and the impact of the war are revealed. In this work, it is described why Ukraine can be considered an attractive country for investment. The material also describes the justification of the importance of the allocation of domestic investments as a necessary direction in the economy of Ukraine, the definition of the necessary concepts, the definition of interrelationships and causeand-effect problems in the matter of investments during a full-scale invasion. The article analyzes three types of domestic investments, namely state investments, investments at the expense of citizens' savings, and investments of large businesses. It is also revealed how each of these types can become key in the development of Ukraine in the economic sphere due to their involvement in the budget. It is also indicated what helped to save the situation in the country after the Russian full-scale invasion, namely, that Ukraine was set back 15 years in achieving its poverty reduction goals. The author describes how large and small businesses affect the economy of countries during wartime, as well as the problems that corporations face. The possibility of domestic investment through the country's citizens, the state budget and domestic Ukrainian business corporations is mentioned. The ways of attracting investment in the context of a full-scale invasion are indicated. The author describes how each type of domestic investment has suffered because of the invasion and how the war has affected each. The opportunities that the Ukrainian state can offer in response to inward investment are considered. The dynamics of the six-month dynamics of the investment climate is also presented. It is indicated how much the capital of direct investors in Ukraine decreased in the first half of 2022.

Global production aspirations and internationalization by state-owned enterprises: A Co-evolutionary view of state-driven industrialized economy

The study aims to explore whether internationalization by state-owned enterprises is a curse or blessing in the context of aspirant industrial economies, such as China. What do state-owned enterprises' global production aspirations, such as outward foreign direct investment, bring into their home country? To answer this question, this study proposes a unique, co-evolutionary perspective of the state-driven industrialized economy by leveraging insights from economic discoveries such as Adam Smith's wealth of nations, David Ricardo's comparative advantage, and Michael Porter's competitive advantage. This view suggests that an outward foreign investment strategy may likely provide state-owned enterprises with access to resources and advanced production technologies, enhance innovation capabilities, gain more competitive advantage, and achieve superior performance, thus leading to spillover effects on their home country's wealth, comparative advantage, and competitiveness. This study discusses China's grand policies, economic performance, and successful cross-border industrial acquisitions.

Assessing the climate change exposure of foreign direct investment

This study deploys newly available data to examine the exposure of multinational companies’ overseas investments to physical climate risks. Globally, foreign investments are significantly exposed to lower physical climate risks, compared with local firms across countries. Within countries however, the differences of physical climate risks between foreign and local facilities are small. We also examine China, as it is fast becoming one of the largest sources of outward foreign investment across the globe. We find that foreign direct investment from China is significantly more exposed to water stress, floods, hurricanes and typhoon risks across countries, compared with other foreign facilities. Within host countries however, once again the physical climate risks of Chinese overseas facilities are comparable to those of non-Chinese foreign investments.

Evolving Policy Framework of Outward FDI from India

The present paper seeks to study the evolving policy paradigm of Indian outward foreign Investment, especially from the year 2000 till the present. Indian overseas investment has gone through a multitude of overhauls since the liberalization and globalization era of the 1990s.. The study, while highlighting the changing sectoral and geographical composition of Indian OFDI from 2000-2021, underpins the pivotal role played by the Indian Government in fostering gradual but steady policy reforms for calibrating the suitable ecosystem for overseas investment by Indian MNCs. The paper’s findings suggest that developed nations are preferred over developing ones owing to the desire of acquiring strategic assets while the service sector grabs the larger share over the manufacturing sector with respect to cross-border OFDI deals from India. The research suggests further liberalization of services like communication, education and personal services to augment the contribution of the service sector in India's OFDI

Impact of China’s OFDI to the Greater Mekong Subregion (GMS)

The study aims to investigate the impact of China's outward foreign investment (OFDI) in Cambodia, Laos, Myanmar, Vietnam, and Thailand (CLMVT). The motivation behind this paper is to examine a pivotal role in determining the macroeconomic factors in these five hosting countries as the “neighboring model” of China. Using panel data for China's outward to her five neighboring countries in the Greater Mekong Subregion (GMS) for the period 2007–2019. This paper uses two different panel specifications models named correlation from classical statistics and Bayesian statistics where empirical results of this research qualify that China's OFDI is the main factor to have a positive influence on the macroeconomic factors in CLMVT. Highlights The GMS region is currently challenging the general FDI theory from the “neighboring model” of China’s going global” strategy using OFDI as a pioneer for success for the small developing country namely, CLMVT. Many studies showed that the implementation of the “Belt and Road” strategy will help China increase investment in countries along the route, which will further promote the implementation of the “on going” strategy since 2013. We use panel data for China's outward to her five neighboring countries in the Greater Mekong Subregion (GMS) for the period 2007–2019, measures the potential of China’s outward foreign direct investment by using two different panel specifications models named correlation from classical statistics and Bayesian statistics. This research implements the core concept of Bayes’ theorem. This theorem allows us to use a priori beliefs of probability to combine with evidence that it can be found (update every economic situation in CLMVT countries) then this method will have a new prediction of the posterior probability distribution. The posterior probability distribution will be received from the simulation algorithm once again. It would be calculated from the scope of every scenario that can be happening based on our belief in the future. The Bayesian correlation testing still confirms that the FDI inflow from China per GDP of CLMVT countries has the most play important role to drive the macroeconomic of these five countries’ economy.

The Belt and Road Initiative, sister-city partnership and Chinese outward FDI

Extant research has explicitly recognized the importance of the compatible environment in the context of globalization. Sister-city partnership has long been developed for the establishment of such a favorable environment to facilitate international investment. Using a panel data set that covers 66 Belt Road countries and 75 non-Belt Road countries from 2006 to 2017, we investigate the impact of sister-city relationship between China and her partner countries as well as its interactive effect with Chinas’ recent global home institution, BRI on the Chinese outward FDI. We find consistent evidence that both sister-city partnership and BRI promote the Chinese outward FDI while these effects are rather complementary than supplementary to each other. Further, we find that the positive impact of BRI seems to be more pronounced in privately owned enterprises (POE) rather than state-owned enterprises (SOE), which suggests that BRI at this stage is more market-oriented and less political-oriented. Our findings suggest that the policymakers should hold more open attitudes towards the establishment of sister-city partnership and towards the Belt Road Initiative to promote more Chinese outward foreign investment so as to deepen the bilateral economic cooperation.

Corruption and Outward FDI: A Dynamic Gravity Approach

We study how the perception of bribery level in target markets by foreign investors shapes their investment behavior. The literature is dominated by two views arguing that inward FDI is deterred by (1) corruption in the host country, and (2) corruption differences between home and host markets. We shift the focus from recipient countries to investors’ perspective and develop a framework with distinctions between low and highly corrupt countries to evaluate their firms’ responses to clean and corrupt environments abroad reflected in their outward foreign investments. Applying a dynamic gravity model to a panel data on bilateral FDI among 36 OECD countries, we find that first, low-corruption sources of investment are deterred by widespread bribery in foreign markets and tend to commit more resources to clean environments. Second, and more interestingly, highly corrupt countries invest more in high-corruption target markets, supporting the corruption distance perspective.

Financial crisis of 2008 and outward foreign investments from China and India

We show that outward investment by Chinese firms with resource and asset seeking motives and Indian firms with market-seeking motives diverged after the financial crisis of 2008, due to different motives and the underlying financing structure of their outward investments. Indian firms faced export market contraction externally and cut back on outward investments as sales revenues shrank. In contrast, Chinese firms that relied on debt finance to seek out international assets expanded investment as investment targets became cheaper and the reliance on leverage inured Chinese firms to the fluctuations of stock markets and other financial implications of the crisis.

Financial Crisis of 2008 and Outward Foreign Investments from China and India

We show that outward investment by Chinese firms with resource and asset seeking motives and Indian firms with market-seeking motives diverged after the financial crisis of 2008, due to different motives and the underlying financing structure of their outward investments. Indian firms faced export market contraction externally and cut back on outward investments as sales revenues shrank. In contrast, Chinese firms that relied on debt finance to seek out international assets expanded investment as investment targets became cheaper and the reliance on leverage inured Chinese firms to the fluctuations of stock markets and other financial implications of the crisis.

Heterogeneous effects of endogenous and foreign innovation on CO2 emissions stochastic convergence across China

Abstract This paper mainly explores the heterogeneous effects of endogenous and foreign innovation on convergence of CO2 emissions across China's 30 provinces from 2003 to 2017. The main academic contributions of this paper are as follows: convergence analysis of CO2 emissions in China is conducted by integrating the β-convergence and stochastic convergence, which can overcome the invalid inferences of conventional convergence. We also compare different effects of inward foreign direction investment (IFDI) versus outward foreign direction investment (OFDI) on CO2 emissions convergence. Quantile regression is employed in absolute and conditional β-convergence of CO2 emissions, which considers more detailed quantile distribution of different variables than traditional ordinary least squares regression. We also compare different convergence of CO2 emissions across China's East, Middle and West. According to the stochastic convergence, East China has the largest convergence rate, followed by Middle China; endogenous innovation decreased CO2 emissions in China. OFDI had negative effects on CO2 missions in China. It is important for Chinese firms to enhance endogenous green innovation capacity. It is imperative for Chinese government to increase reverse green technology spillover from OFDI.

How outward investment from emerging markets affects economic development at home: using the eclectic paradigm to synthesize two IB literatures

PurposeThis paper aims to use the eclectic paradigm as a broad organizing framework to bring together two somewhat parallel international business (IB) literatures, one on the development effects of multinational enterprise activity and the other on the internationalization of emerging market multinationals (EMNEs). The author does so to better understand how outward foreign investment shapes economic development in firms’ home countries.Design/methodology/approachConsidering that the characteristics of foreign investment by EMNEs likely differ from that of their developed economy counterparts and that such characteristics may have unique development consequences, the author revisits one of IB’s overarching theories to rethink how ownership, location and internalization advantages take shape and stimulate diverse development outcomes.FindingsMy narrative review and conceptual analysis indicate that the eclectic paradigm is a valuable framework that can be used to shed light on underexplored phenomena and thereby inform important policy debates. The analysis suggests that unique characteristics of EMNE investment simultaneously have positive and negative development consequences in their home countries.Practical implicationsThe author sets out a research agenda that revolves around six propositions that separately relate one of these three distinct characteristics of EMNE investment to two development outcomes, namely, spillovers and direct effects on home-country employment. My propositions suggest that important policy dilemmas potentially apply, in that each of the three characteristics positively affects one of the aspects of development, but negatively the other.Originality/valueMy research agenda presents international business scholars with new opportunities to build on a history of policymaking impact, now geared toward resolving society’s grand challenge of underdevelopment.