What question did this study set out to answer?

This research explores how productivity and state ownership affect outward foreign direct investment in Chinese firms.

July 1, 2026Journal of Emerging Market Finance0 citations

How Do Productivity and State Ownership Affect Firms’ OFDI? Evidence from China

Key Points

This research explores how productivity and state ownership affect outward foreign direct investment in Chinese firms.
Analyzed data from Chinese listed firms between 2005 and 2022.
Assessed the relationships between productivity, state ownership, and OFDI across various sectors and regions.
Considered factors like sunk costs and international experience in subsidiary investments.
Productivity significantly enhances OFDI, particularly in high-sunk-cost industries and specific regions.
State ownership generally hinders OFDI, though central state-owned enterprises can counteract this negative effect.
Firms with greater international experience benefit more from productivity in their OFDI efforts.

Abstract

Drawing on Chinese listed-firm data (2005–2022), this article examines the impact of productivity and state ownership on outward foreign direct investment (OFDI). Productivity robustly facilitates OFDI, whereas state ownership impedes it. The productivity effect is strongest in high-sunk-cost industries, eastern and central regions, and subsidiary-level investment; the ownership barrier persists across high- and low-sunk-cost sectors, the eastern region, and subsidiary ventures. Productivity partly offsets the ownership disadvantage, and firms’ international experience amplifies the productivity effect. Notably, central state-owned enterprises reverse the negative ownership effect. Overall, China’s OFDI is driven predominantly by productivity-induced market-seeking, offering new micro-level evidence on its determinants. JEL Codes: F21, F23

Ask AI

Helpful

Bookmark

View Full Paper