Abstract
This chapter finds that Chinese manufacturing firms that engage in outward foreign direct investment (ODI) have better economic performance than non-ODI manufacturing firms. Overall, ODI firms are more productive and have higher pro fit ability than non -ODI firms. The sector analysis shows that the exceptional performance is significant for labor intensive industries. Finally, the ODI activity can raise the productivity of other firms in an industry. The larger the ODI within an industry, the higher the productivity of all firms in that industry. The chapter suggests that domestic firms set up their firm’s global strategy and reallocate the firm’s resources according to the changing investment environment, taking advantages of profit opportunities outside of domestic markets and invest abroad to get new markets and new technology.
This chapter is published in China Economic Journal by Tian Wei, Miaojie Yu and Fan Zhang.
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Notes
- 1.
China’s non-financial investment (i.e. ‘green-field’ investment) outweighs the financial investment (i.e. investment from mergers and acquisitions). In 2011, China’s non-financial investment accounted for 91.8% of its entire foreign investment.
- 2.
In particular, an observation is included in the sample only if the following observations hold: (1) total assets are higher than liquid assets; (2) total assets are larger than the total fixed assets and the net value of fixed assets; (3) the established time is valid (i.e. the opening month should be between January and December); and (4) the firm’s sales must be higher than the required threshold of RMB 5 million.
- 3.
For example, ‘Ningbo Hangyuan communication equipment trading company’ shown in the ODI data set and ‘(Zhejiang) Ningbo Hangyuan communication equipment trading company’ shown in the National Bureau of Statistics of China production data set are the same company but do not have exactly the same Chinese characters.
- 4.
In the example above, the location fragment is ‘Ningbo,’ the industry is ‘communication equipment,’ the business type is ‘trading company,’ and the specific name is ‘Hangyuan.’.
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Tian, W., Yu, M. (2022). The Exceptional Performance of Chinese Outward Direct Investment Firms. In: Outward Foreign Direct Investment of Chinese Enterprises. Contributions to Economics. Springer, Singapore. https://doi.org/10.1007/978-981-19-4719-3_1
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