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Outward Direct Investment, Firm Productivity and Credit Constraints: Evidence from Chinese Firms

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Outward Foreign Direct Investment of Chinese Enterprises

Part of the book series: Contributions to Economics ((CE))

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Abstract

China is currently the third largest country in terms of outward direct investment (ODI), with the investors mainly being state-owned enterprises. This presents a question: What inhibits private enterprises from increasing ODI ? Using a firm-level panel data set for Zhejiang Province in China, we examine the impact of firm heterogeneity on private firm ODI. We have three main findings: first, a higher productivity level contributes to better access to ODI, and increases ODI value as well; second, lowering a firm’s financial constraint level can increase both the probability and volume of ODI; third, productivity cannot offset the negative effect of financial constraint on private firm ODI.

This chapter is published in Pacific Economic Review by Wang Bijun, Yuyan Tan, Miaojie Yu, Yiping Huang.

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Notes

  1. 1.

    This dataset is provided by International Cooperation Office of Zhejiang Province.

  2. 2.

    Since there is no detailed information in the dataset allowing us to classify export firms into general trade and processing trade groups, we are not able to directly test this interpretation. However, some findings from other studies could be good supports of our argument. Dai et al. (2012) used custom data and found that processing trade accounts for nearly half of China’s exports. More importantly, those firms are 4% to 30% less productive than non-exporters. Yu (2015) showed low-productivity firms self-select to engage in process sing trade. These evidence are consistent with our results.

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Authors and Affiliations

  1. School of Economics, Peking University, Beijing, China

    Wei Tian

  2. Liaoning University, Shenyang, China

    Miaojie Yu

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  1. Wei Tian
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  2. Miaojie Yu
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Correspondence to Wei Tian .

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Tian, W., Yu, M. (2022). Outward Direct Investment, Firm Productivity and Credit Constraints: Evidence from Chinese Firms. In: Outward Foreign Direct Investment of Chinese Enterprises. Contributions to Economics. Springer, Singapore. https://doi.org/10.1007/978-981-19-4719-3_6

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  • DOI: https://doi.org/10.1007/978-981-19-4719-3_6

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  • Publisher Name: Springer, Singapore

  • Print ISBN: 978-981-19-4718-6

  • Online ISBN: 978-981-19-4719-3

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

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