Outward FDI and productivity promotion of exporting firms: firm-level evidence from China

Abstract

Purpose

The purpose of this paper is to estimate the impact of China's outward foreign direct investment (OFDI) conducted by exporting firms on their productivity.

Design/methodology/approach

This study uses two Chinese firm-level datasets. To reduce the bias when merging the two datasets, this study uses a comprehensive link approach to obtain more observations. The propensity score matching method is employed together with the difference-in-difference and difference-in-difference-in-difference approaches to identify the casual effects.

Findings

The study finds that exporting firms become more productive through learning effect via OFDI, and the positive impact of OFDI on total factor productivity materializes very quickly but subject to diminishing return. The study also finds that state-owned enterprises gain less learning effect via OFDI than private-owned enterprises, and firms with higher export intensity or larger size tend to gain less improvement in productivity via OFDI.

Originality/value

This is one of the first studies to investigate empirically the impact of OFDI conducted by exporting firms on their productivity. In particular, the study analyzes three types of firm heterogeneous factors, namely, ownership, export intensity and size, in affecting exporting firms' learning effect via OFDI.

Citation

Zhang, S., Li, H. and Chen, C. (2022), "Outward FDI and productivity promotion of exporting firms: firm-level evidence from China", International Journal of Emerging Markets, Vol. 17 No. 9, pp. 2218-2238. https://doi.org/10.1108/IJOEM-07-2020-0795