企业生产力与对外直接投资 一基于中国工业企业的实证研究

来源: 未知 作者:paper 发布时间: 2020-03-17 10:51
论文地区:中国 论文语言:中文 论文类型:英语论文
随着“走出去”战略和“一带一路”战略的稳步推进,中国的对外直接投资近年 来取得了突飞猛进的发展。根据联合国贸发会议(UNCTAD)《2018世界投资报告》显示, 2017年中国对外直接投
摘要
随着“走出去”战略和“一带一路”战略的稳步推进,中国的对外直接投资近年 来取得了突飞猛进的发展。根据联合国贸发会议(UNCTAD)《2018世界投资报告》显示, 2017年中国对外直接投资的流量和存量分别占全球当年的11. 1%和5. 9%,流量位列全 球国家(地区)排名的第3位,存量由2016年的第6位跃升至第2位。中国现在不仅 是发展中国家中最具吸引力的外商投资目的地,同时也是世界范围内主要的资本输出 国之一。虽然学界对中国对外直接投资的研究已经屡见不鲜,但是以往大部分研究都 是基于宏观层面的分析。近几年基于企业层面的数据,从企业异质性角度出发的研究 开始逐渐兴起。因为从微观层面出发,能更加深入地分析企业对外投资的动机及其特 征,同时也能更深入地洞察企业外直接投资对中国企业及产业的影响。
本文结合中国工业企业数据库(2011-2013)和商务部公布的《境外投资企业(机构) 名录》,并基于Helpmanetal. (2004)的出口-投资模型(HYM模型)从企业异质性的角 度研究了中国企业的对外直接投资行为。本文主要研究以下几个问题:(1)与非对外直 接投资企业相比,对外投资企业存在哪些特征;(2 )企业生产率高低对中国企业国际 化战略决策的影响,通过Logit模型检验其是否符合HYM模型的理论预期;(3 )投资 高收入国家的企业和投资中低收入国家的企业在生产率方面是否存在显著差异;(4 ) 对外直接投资对我国企业的生产率增长的影响。
首先通过比较分析,(1)我们发现与非对外直接投资企业相比,参与对外直接投资 的企业的确在生产率,企业规模,工业产值,资本密集度等方面要略胜一筹;(2)通过 Logit模型进一步分析,结果显示生产率越高的企业越倾向于选择对外直接投资(生产率 最高的企业选择对外直接投资,生产率略低的企业选择出口或者仅服务于本国市场), 这一结果也基本符合HYM模型的理论预期;(3)倾向于投资低收入国家的企业与投资高 收入国家的企业的生产率差异并不显著;此外,结果还表明我国存在出口 “生产率”悖 论,即出口企业的生产率并不比单纯服务于国内市场企业的生产率高;(4)为了控制 “自选择”偏误和内生性问题,本文采用倾向匹配得分法和双重差分法实证检验了对外 直接投资对企业生产率的影响,结果显示对外直接投资对我国企业的生产率增加具有显 著的正向影响,即便是国有企业也存在显著的正向效应;此外投资高收入国家的生产率 效应要高于投资低收入国家的生产率效应。
Introduction
Research Background
Since the implementation of the epoch-making policy-the reform and opening up, China has been engaging in the integration with the global economy. Sequentially, in the early 1990s, a stream of foreign direct investment (FDI) started to flow into China and a number of Sino-foreign joint-ventures were established. China’s economy, thenceforth, has experienced a remarkable increase, part of which can be attributed to the positive effects of inward foreign direct investment (IFDI). Chinese companies, from the perspective of microlevel, have obtained a great deal of energy and vitality from IFDI as well. Nowadays, China has been one of the most attractive and desirable destinations for FDI. In 2017, against the backdrop of a decline in worldwide FDI, China continued to be the largest FDI recipient among developing countries and the second largest in the world, just following the United States (UNCTAD, World Investment Report 2018). A large body of literature, therefore, has been investigating the impacts of IFDI on China5 s economy with respect to the technology spillover effects, the alteration of industrial structure, the employment issue, etc.
In the early 2000s,the Chinese government launched the “Go globally” strategy to further integrate into the globalization, inspiring Chinese firms to export and invest abroad. After the global financial crisis in 2008, an increasing number of Chinese firms conducted mergers and acquisitions (M&As) in foreign markets. Subsequently, with the launching and proceeding of “The Belt and Road Initiative”,China’s outward foreign direct investment (OFDI) has captured a continuous increase. Last decade, so to speak, has witnessed an imposing growth of China9 s OFDI. Today, China has been one of the main capital exporters just behind Japan and the United States (UNCTAD, World Investment Report 2018). Consequently, this phenomenon has caught growing attention from researchers both at home and abroad to investigate its unconventional patterns and rapid growth. (Buckley et al., 2008; Zhang & Daly et al., 2011; Wang et al., 2012; Kolstad & Ivar et al., 2012; Li & Jian et al., 2016; Yao et al., 2016; Li & Luo et al., 2018). Amid the existing literature, however, a large scale of the spotlight has been cast on the macro-level characteristics and effects, which substantially dwarfs the micro-level studies. Therefore, inspired by the pros or cons of previous studies, this paper aims to shed more light on this topic based on a firm-level dataset.
Research Objectives
From the perspective of theoretical evolution, theories regarding FDI, initially, are to cope with multinational enterprises’(MNEs) overseas investment practice which dominantly occurred in developed countries. Taking the relationship between firm productivity and foreign investment propensity as an example, Helpman et al. (2004) have theoretically and empirically shown that only the most productive firms are able to invest outwards. Empirical analysis ensuing based on European and American firm-level data has further validated this viewpoint (Eaton et al., 2004; Girma et al., 2005; Mayer and Ottaviano, 2007; Bernard and Jensen, 2007; Yeaple, 2009). The reason why these empirical tests based on the firm-level data of advanced countries, by and large, are consistent with theoretical expectations is that firms born in these countries have specific advantages that can be transferred. These advantageous enterprises either exploit the international market via their competitiveness or make the best of the low-cost factors of host countries to promote their efficiency. With the upsurge of developing countries, especially emerging economies (EE) during the 1970s and 1980s, however, the power of classical FDI theories based on the developed countries seems to be not that competent to explain developing countries5 OFDI activities. For instance, Ryubei and Takashi (2012) by analyzing Taiwan’s micro-level data found that the productivity of firms who invested abroad was not necessarily higher than that of firms without FDI.
Compared with firms from advanced economies, Chinese firms as latecomers, tend not to have the apparent “specific advantages” that can be transferred. In addition, China as a transition economy, its economic system, policies, ownership characteristics, etc. are quite distinguished from other countries. Thus, the initial objective of paper is to give more insights into these issues: (1) Compared with non-OFDI firms, what are the characteristics of the OFDI firms; (2) What are the impacts of productivity on firms5 OFDI decision and to what extent can HYM model explain Chinese’ firms’ OFDI behavior; (3) Is there significant productivity disparity between firms tending to invest high-income countries and those being apt to invest in low-middle income countries. (4) What is the impact of OFDI on Chinese firms’ productivity growth? Additionally, China still remains as a developing country at present with a certain social-economic gap between advanced economies. How to make the best of external resources and market, particularly the advanced technology and innovation resources of developed countries, to promote firms5 productivity and profitability, to optimize the industrial structure, and to escalate the quality of economic growth? This is one of the main missions of
reform and opening up in a new and upgraded stage. Under the background that a large scale of companies is investing abroad, therefore, to get a further understanding of the characteristics and impacts of Chinese MNEs5 OFDI under the context of firm heterogeneity is of great significance.
Research Methods and Main Contents
This paper mainly employs documentation, descriptive, and empirical analysis. Based on the theoretical evolution of OFDI, we first listed some literature concerning OFDI practices of developed countries, then the ones pertaining to developing countries. In the end, we went through a bunch of literature about firm heterogeneity. Then we conducted a descriptive analysis of the development of China5 s OFDI in different stages. On the basis of the previous theoretical mechanism and empirical research, we empirically analyzed the nexus between firm productivity and their OFDI by employing a logit model, the propensity score matching method and the difference-in-difference method.
The remaining chapters mainly encompass the following parts: Chapter 1 is to review the theoretical and empirical literature related to the main issues in conjunction with some comments, which provides a clearer perspective on theory evolution and referable research thoughts and methods for Chinese firms5 OFDI activities; Chapter 2 sheds light on the development of China9 s OFDI in terms of history, current situation, and some urgent problems from a macroscopic viewpoint, aiming at displaying some general characteristics of China5 s OFDI; Chapter 3 intends to give more insights into the relationship between firms5 heterogeneity and their OFDI decision, to test whether the Chinese case is compliant with the predictions of current FDI theory or not; Chapter 4 mainly investigates the influences of OFDI on firms productivity growth; The last part is comprised of a conclusion and discussion of the limitations of this paper and the future research directions in this field.
Chapter One Literature Review
This chapter mainly deals with the relevant literature review of OFDI and multinational enterprises. Initially, the author looked back on the theoretical part, which serves as the foundation of this study. Specifically, the author went through the traditional OFDI theories regarding both advanced economies and merging economies in conjunction with some comments on their pros and cons; Subsequently, certain of existing literature on firm heterogeneity and firms5 internationalization decision was reviewed from both the theoretical and empirical perspective; Ultimately, centering on the core issues of this study, I carried on the documents review to the impacts of OFDI on firms5 productivity. All in all, based on the theory of firm heterogeneity, this chapter reviewed two categories of study respectively: one is about the motivation of MNEs5 OFDI behavior; another is associated with the impacts of OFDI on parent firms.
1.1Traditional Theories about OFDI and MNEs
MNEs and their OFDI activities have always been an intriguing and prevailing topic in the sphere of international economics. It is widely acknowledged that literature focusing on OFDI theories and MNEs starts from the 1960s, which contrasts sharply with the neoclassical trade and financial theory that made little distinction between international portfolio investment flows and OFDI. Due to the fact that the early OFDI is dominantly conducted in MNEs of developed countries, thus, the following theories are initially intended to shed light on the OFDI behavior of MNEs belonging to the advanced economies, and mainly focusing on the emergence of OFDI. In accordance with the evolution of OFDI theory, the theoretical framework mainly composes monopolistic advantage theory, product life cycle theory, internalization theory, and marginal industry theory, etc. Each theory, to some extent, has explained the OFDI practices of developed countries from a specific perspective. However, the literature of this field is relatively general and scattered due to a lack of a unified theoretical and logical framework. In this section, I reviewed an array of traditional and influential OFDI theories related to both developed and emerging economies, and then briefly commented on their merits and demerits.
1.1.1Traditional OFDI Theories about MNEs of Developed Countries
Stephen Hymer^ seminal dissertation (1960) made a great contribution to OFDI theory, leading us to an analysis of MNEs based on an industrial-organizational theory by jumping over the intellectual straitjacket of neo-classical-type trade and financial theory. Multinationals firms were just arbitrageurs that transferred the capital from countries where returns were low to countries where returns were higher based on traditional international trade and investment theory. Escaping from the arid mold of orthodox international economics theory, Hymer^ pioneering conceptual insight put emphasis upon the MNEs per se. Hymer's monopolistic advantage theory demonstrated that monopolistic advantage (special assets) is the immediate driving force of MNEs5 FDI instead of the financial structure decisions based on the assumption of market imperfections. He reckoned that there existed at least four types of market imperfections: the imperfection in the product market, in the factor market, in the economies of scale and the externality and deficiency of management. The core of monopolistic advantages is the technical advantage. Although Hymer^ theory identified the structural market failure presciently, unfortunately, it overlooked the distinction between structural and transaction-cost market imperfections. In addition, not only did he neglected the significance of the spatial and geographical dimension of the MNEs he also paid little attention to the policymaking and the political or social issues of developing nations.
1.1.1.2Product Life Cycle (PLC) Theory
Raymond Vernon (1966) introduced the product cycle model to explain firms5 marketseeking production of a particular nationality or ownership from a dynamic perspective of technology development and international trade. According to PLC theory, product life was divided into three stages, namely, innovation stage, standardization stage, and mature stage. Countries and their firms were positioned in different places within the hierarchy of international trade, where firms5 location choice, overseas production, and export were combined into a dynamic and systematic analysis. Initially, relying on their strong capital and R&D capabilities, developed countries produced a new product (or more precisely, the value- added activities based on a firm^ proprietary assets) mainly for the domestic consumption and exported a small portion to the sub-developed markets. Therefore, enterprises did not need outbound investment in this phase. At the following stage, on the one hand, the technology of new products was maturing; on the other hand, the demand from foreign countries was increasing. Thus, new products were exported to foreign countries with similar demand patterns
and supply capabilities. Simultaneously, for one thing, firms of import countries started to imitate the new product; for another thing, authorities of importers set out to limit the inflow of those innovative products for sake of protecting their domestic infant industry by escalating the import barrier, which gradually shifted the innovative firms from exporting to outward investing. Later, as the product becomes standardized or mature, the competitive advantages of the supplying firms were seen to change from those to do with the uniqueness of product per se, to their ability to minimize the costs of value-adding activities and/or their marketing expertise. At the same time, as consumer demand turns more price-elastic, labor becomes a more important ingredient of costs, and foreign markets keep expanding, the desire to site value- added activities in a foreign rather than a domestic location grows stronger. Eventually, Vernon deduced, if the conditions in the host countries were suitable, the affiliate might replace exports from the parent company or even export back to it.
Like Hymer, Vernon provides a theory that incompletely addressed the issues related to MNEs9 activities. The product life cycle, on the one hand, is a pioneering and dynamic elucidation of the determinants of, and the relationship between, international trade and foreign production. In addition, it brings in some novel hypotheses concerning demand stimuli, technology leads and lags, and information costs, which have been sequentially testified to be useful tools for the study of foreign production and exchange. On the other hand, as Vernon (1979) himself acknowledged, by the 1970s, the explanatory ability was insufficient towards the phenomenon that the further geographical reach of MNEs coupled with a growing convergence in the advanced markets of the world. Furthermore, it does not explain the occurrence of resource-based, efficiency-seeking or strategic-asset-acquiring OFDI.
1.1.1.3Internalization Theory
Buckly and Casson (1976) argued that due to the market imperfections in intermediate products, notable knowledge, firms tended to create an internal market (internalizing the external market) to increase profits and avoid certain costs on the basis of profit maximization and growth principles of firms. There are two ways to create an internal market: "First, internalization of market refers to the replacement of an arm's length contractual relationship (i.e. external market); Second, internalization of an externality refers to the creation of a market of any kind were non-existent before,/ (Casson, 1986). Under such circumstances, internalizing markets across national borders gives rise to MNEs. Later on, the concept of "transaction costs" which referred to all the costs in organizing an economic activity was brought in and got
prevalent. The logic of transaction cost is that if firms seek to lower costs and uncertainty and
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higher revenues, then they will try to internalize markets across national boundaries. There are two typical cases: one is that information asymmetry among transaction parties will spark uncertainty to firms' production of intermediate goods. In order to guarantee the product quality, firms tend to internalize this part to mitigate transaction costs; another is, in the context of an imperfect market, to prevent the leakage of strategic technology, innovation, and knowledge, firms prefer to produce by themselves instead of outsourcing.
If Hymer's theory well explained the horizontal FDI seeking market expanding, then internalization theory illustrated the vertical FDI seeking for efficiency improvement to a large degree. Meanwhile, internalization theory sheds some light on the global value chain and internal trade of MNEs as well. However, it is not strong enough to explain the horizontal FDI and firms' FDI of developing countries.
1.1.1.4Eclectic Paradigm
Due to the respective deficiency of above theories in fully explaining the FDI issues, Dunning (1979, 1980, 1988) integrated a string of different theories and developed an eclectic paradigm or so-called "OLI (Ownership, Location, Internalization) paradigm to determine the "extent,’,’'form,' and "pattern,' of international value-adding operations of firms.
Dunning argued that if foreign firms wanted to compete with domestic firms in the host countries, they must hold certain edges specific to the nature and/or nationality of their ownership, for which they had to undertake additional costs of setting up and conducting foreign value-added activities besides facing the competition form domestic firms. As for the locational advantages, Dunning (1988) indicated that firms tended to get involved in foreign production whenever they realized that it was in their best interests to combine spatially transferable intermediate products produced in the home country, with at least some immobile factor endowments or other intermediate products in another country. Last, internalization advantages encompassed the advantages of controlling, coordinating ownership and location- specific advantages within the MNEs instead of licensing or selling them to domestic firms in the host country.
Eclectic paradigm not only absorbs the nutrition of monopoly advantage theory and internalization theory but also incorporates the location factors that international trade theory underlines. Thus, it manifests strong explanatory power and openness and for quite a long time, it has been regarded as a general theory to explain MNEs5 FDI behavior. However, it still has some flaws. That is, for one thing, it overlooks the facilitation effect of the home country^
policy; for another, it is invalidated to explain the MNEs5 FDI behavior of developing countries.
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After the comparison between American firms’ and Japanese firms’ FDI practices,Kojima (1978) put forward FDI comparative advantage theory or marginal industry expansion theory to explain firms9 FDI behavior. Here, marginal industries refer to the sunset industries in developed countries, meanwhile, they might be the promising industries in developing countries due to the imbalanced development between the north and the south. Thus, by utilizing the comparative advantages of sunset industries in technology, management, and brand plus the lower factor price in recipient countries, firms in those industries of developed countries were still able to gain some growth/profits when investing in developing countries. In addition, Kojima intrinsically held that FDI should work as an efficient conduit for trading intermediate products, but the timing and direction of such investment should be determined by market forces rather than by hierarchical control.
To sum up, Kojima’s prescription is that FDI should commence from investor country’s industries that are or will be at a disadvantage compared with other domestic industries but still hold some advantages in comparison with those industries of the recipient country. Sequentially, firms of developed countries gradually start to invest outbound in accordance with their marginal industries. By following this pattern, not only can it improve the home country^ industrial structure, facilitate the foreign trade but also it is conducive for the host country to upgrade its industrial structure and enhance the development of relevant industries.
Kojima almost followed Vernon’s doctrine,although to some extent he employed the trade models to explain the patterns of Japanese firms5 FDI. However, he ignored the influence of transaction costs on allocation on international resources and hence failed to explain the FDI phenomenon among developed countries and the FDI behavior of developing countries.
A brief summary of OFDI theories related to MNEs of developed countries is listed in Table 1.
1.1.2Traditional OFDI Theories about MNEs of Developing Countries
With the economic development of developing countries, especially the rise of emerging market countries, their outward direct investment has experienced a substantial increase in the last two decades. However, unlike MNEs of developed countries especially MNEs of the U.S.A., firms of developing countries may well not possess those core competitive advantages from market monopoly, sophisticated technology or advanced management. Thus, OFDI theories


based on advanced countries, practices are insufficient to explain their new features. Under such kind of circumstances, starting from the 1970s, a couple of researchers began to shift their focus on the OFDI behavior of developing countries and put forward some consequential theories.
1.1.2.1Small-scale Technology Theory
Wells (1977) proposed the small-scale technology theory to shed light on the firms5 FDI
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phenomenon of developing countries. He argued that MNEs9 comparative advantages of developing countries principally stemming from lower production costs. Further, the low-cost advantage mainly comes from the small-scale technology catering for the small-scale market and the market similarity with the host countries. By contrast, the technological and economies- of-scale advantages of MNEs in developed countries primarily serving the large-scale market, however, are not as applicable as in small-scale markets where they are not able to make the best of the advantage of economies of scale. In addition, unlike the sumptuous marketing strategies of MNEs of developed countries, MNEs of developing countries usually take the low- price marketing strategy, which is a powerful weapon to stab the low-end market.
Wells5s theory combines the market similarity between the home country and host country and MNEs5 own comparative advantages of developing countries, which offers inspiration to those firms of developing countries without highly-advanced technology and economies of scale to participate in global competition by investing abroad.
However, small-scale technology theory essentially is a passive technology theory following Vernon^ tradition. It implies that developing countries simply utilize the obsolete technologies of advanced countries to serve other developing countries with parallel market features. On the one hand, this might leave developing countries5 MNEs hovering on the brink of global value-chain and product life cycle; on the other hand, it is disabled to explain the reverse FDI from developing countries to developed countries, especially for the investment in the sphere of high technology.
1.1.2.2Investment Development Path Theory
The investment development path (IDP) theory was proposed by Dunning in the 1980s, which is a dynamic evolution of the eclectic paradigm. The core proposition holds that the net OFDI position[ Net OFDI=Outward FDI-Inward FDI] of developing countries is systematically related to its level of economic development and the advantages of ownership, location, and internalization.
Dunning categorized economic development into four stages according to the GNP per capita of each country. Countries at the first stage (GNP per capita<$400) neither possess many ownership advantages, internalization advantages nor an attractive business environment. Thus, in such context, the net OFDI is most negative due to the infrequent IFDI and almost empty OFDI; At the second stage ($400<GNP per capita<$2000), thanks to the development of domestic economy, the expand of domestic market and the improvement of domestic business
environment, the location advantages get strengthened. Under such circumstances, the IFDI grows significantly while the OFDI is still in a start-up state because of the limited ownership and internalization advantages. A majority of developing countries are at this stage; When countries enter into the third stage ($2000<GNP per capita<$4750), their economy has experienced a thriving development. Thus, a segment of firms has gained some ownership and internalization advantages to invest abroad. As a result, both IFDI and OFDI has reached a certain scale. A number of newly industrialized countries belong to this group; The fourth stage (GNP per capita>$4750) mainly refers to the advanced counties or regions on account of their remarkable ownership and internalization advantages, and their globalized strategies to utilize the location advantages of host countries.
IDP theory, combining the abilities of countries to attract IFDI and invest beyond boundary due to the domestic economic development, holds that the position of the country^ international investment is positively correlated with its GNP per capita. However, if we look into the issue from a dynamic perspective, we will discover that there is a brunch of modern international investment practices, which are contrary to this theory. Besides, the method per se just using the GNP per capita as an indicator to category the economic development level has some limitations.
1.1.2.3Technical Innovation and Industrial Promotion Theory
Since the middle of the 1980s, developing countries’ OFDI has seen a significant increase. Especially in those newly industrialized economies, firms began to target the developed country as a destination and then became mighty competitors for local firms. Based on the prerequisite of technology accumulation, Cantwell and Tolentino (1990) put forward technical innovation and industrial promotion theory to explain this phenomenon from a dynamic perspective. This theory offered two propositions: for one thing, the upgrading of industrial structure in developing countries and regions shows that firms5 technological capability has been steadily improved, which is the result of continuous technology accumulation; another thing is that the improvement of technological capabilities of developing countries is directly related to the growth of their OFDI. Existing technology capability is one of the main factors affecting international production activities, as well as the form and growth rate of MNEs5 OFDI in developing countries. Based on these two preconditions, Cantwell and Tolentino argued that the industrial and geographical distribution of developing countries5 OFDI was gradually evolving over time and were predictable.
Generally speaking, this theory holds that the accumulation of technology is the internal
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driving force of MNEs’ OFDI in developing countries which results in firms5 regional expansion according to the psychological distance or cultural distance. Further, with the reinforcement of the inherent technological capability, for one thing, the OFDI will be gradually evolved from resource-oriented to technology-oriented; for another thing, the industries involved will get upgraded and the composition of the industry is closely correlated with the change of regional distribution. So to speak, this theory comprehensively explains the phenomenon of OFDI in developing countries, especially in Asia’s emerging industrial countries and regions after the 1980 to a large extent, not only including the rising of this kind of OFDI but also the trajectory-from developing countries to developed countries, from traditional industries to high-tech industries. Therefore, this theory has a certain guiding significance for developing countries in strengthening technology accumulation and innovation through OFDI and further upgrading the industrial structure and international competitiveness.
1.1.2.4Linkage-Leverage- Learning (LLL) Framework
To unveil the puzzle—how firms as latecomers and newcomers from developing countries that lack strategic resources and are distant from major markets become MNEs, challenge even defeat incumbents in the global economy—Mathews dedicated himself to the study on Asia- Pacific business dynamics over the past decade. Mathews (2006) found some common characteristics of those firms and proposed the linkage-leverage-learning (LLL) framework, which offered some clues to unraveling this question. He pointed out that firstly, the early international expansion of firms in developing countries did not rely on their own advantages, but on obtaining such advantages through external linkages; secondly, the links could be established with incumbents or partners so that resources could be leveraged, for example, to form a strategic alliance or to establish a joint-venture; thirdly, firms learned an gained some advanced technologies, managerial skills to bolster their efficiency and development through such repeated applications of linkage and leverage. Therefore, the innovative patterns of outward expansion in search of new resources can be captured by this process. To sum up, this framework, based on the extended resource-based view (RBV), pays more attention to firms9 acquisition of external resources rather than their own advantage to unravel the OFDI phenomenon of MNEs in developing countries. A summary of OFDI theories related to MNEs of developed countries is expressed in Table 2.























1.2Firm Heterogeneity and OFDI
1.2.1Firm Heterogeneity Theory
In the 1980s, in order to shed more light on the widespread phenomenon of intraindustry trade or trade between countries with parallel factor endowment, Dixit and Stiglitz (1977) primarily developed the modeling of monopolistic completion and product differentiation. Then it was employed by Krugman (1979, 1980), who opened the door to formally modeling multinational firms within the general-equilibrium framework (Antras and Yeaple, 2014). To capture more reality, Melitz (2003) incorporated firm heterogeneity (firms differ in productivity) within an industry to illustrate that when exposed to trade, only the relatively more productive firms are able to export to foreign markets while the less productive firms will continue to serve the domestic market in conjunction with the least
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productive firms being kicked out the industry. Focusing on firms5 choice between exports and horizontal FDI (HFDI), Helpman, Yeaple and Melitz (2004) (HYM model) extended the trade model of Melitz and proved that: first, only the most productive firms tend to engage in foreign activities; second, after weighing the transportation costs of export and the fixed costs of FDI, the most productive firms are more likely to invest abroad, while the relatively less productive firms choose to export; third, other low-productivity firms opt to serve the domestic market only and the least productive firms are forced to leave the industry. This is the first time to demonstrate firms5 horizontal FDI behavior from the perspective of firm heterogeneity.
Grossman et al. (2006) developed a complementary strategy model incorporating firm heterogeneity as a determinant of horizontal and vertical FDI. They showed that even within the same industry where each firm faced the same market size, fixed costs and transportation costs, firms differing in productivity have different optimal strategies. In addition, they summarized that the least productive firms produce in the home market while firms engaging in FDI are more productive, and the most productive firms will move both intermediate and assembly stages to the developing countries. Integration strategies depend on the scale of trading costs and fixed costs of the intermediate and assembly stages related.
1.2.2Empirical Evidence from Developed Countries
Helpman et al. (2004), by using American firms’ data, found that exporters outperformed non-exporters in productivity, while the productivity of firms with OFDI was greater than export firms. Bernard et al. (2006), Bernard and Jensen (2007), by using American firms9 data, also discovered that firms with lower productivity only operated in the home market, those more productive ones chose to export, while the most productive firms decided to invest outbound. Yeaple (2009) reported that: first, the most productive firms invested more foreign countries and gain more revenues in these investment destinations; second the country-specific characteristics, for instance, economic development level, geographical and cultural distance and so on, had a significant influence on American OFDI activity. Eaton et al. (2004) by using French firms5 data, showed that the more foreign markets a firm invested, the higher its productivity, which indicated that the increasing costs of OFDI required firms to be more productive. Grima et al. (2005), by using English firms5 data, found similar evidence. Mayer and Ottaviano (2008) also manifested that only a small proportion of firms export or invest overseas, whose productivity was significantly higher than those only served the domestic market after investigating the international activity of European firms. By and large, the evidence from developed countries is in line with the prospection of Helpman^ theory. Because a large scale of FDI emerging from advanced countries also goes predominately to developed countries, especially in the early stage (now the share of developing countries has been enlarging), most of which is HFDI (Navarreti et al., 2006).
Compared with European and American countries, Japan as a latecomer displays some heterogeneity with respect to OFDI, where not only exists a bunch of HFDI but also a relatively large proportion of vertical FDI (VFDI). Aimed at expanding market share in host countries, Japanese firms, from the automobile and electronics industry to the household electrics industry, have made plenty of investments in other developed countries based on their comparative advantages. Meanwhile, they also locate their low and middle-end production in some peripheral developing countries, like Malaysia, Indonesia, and mainland China in order to reduce the production costs of intermediate inputs. By investigating Japanese firms5 data, Head and Ries (2003) found not only the consistent results mentioned before but also the fact that firms who invested in developed countries were more productive than those invested in low-income countries. As presented in the HYM model (2004), the productivity cutoff of OFDI is determined by host countries’ specific factors, like market share, factor prices, productivity and so on. Therefore, the productivity cutoff of firms for investing in developing countries tends to be lower than that in developed countries. Likewise, Ryubei and Tanaka (2009), after comparing the productivity heterogeneity of Japanese firms in Europe, America, and East Asia, discovered that firms investing in the United States and Europe simultaneously were more productive than those investing only in the United States or Europe, while those investing in East Asian countries were not necessarily more productive than exporters or those only operate in home market. Therefore, the characteristics of Japanese firms5 OFDI activities indicate that the efficiency of firms investing in developed countries, such as Europe and the United States, is consistent with the theoretical expectations, while the productivity of those investing in developing countries tends to remain in uncertainty.
1.2.3Empirical Evidence from Developing Countries
With the development of globalization, the OFDI share of developing countries has been expanding in recent decades. Compared with the OFDI from advanced countries, what is the feature of OFDI from developing countries? Is there anything unexpected? Thus, this topic has caught increasing attention from researchers. Damijan et al. (2007), by exploring the rich dataset of Slovenian manufacturing firms, found that the productivity of firms investing abroad, of exporters and of firms only operating domestically decreased successively, which were in accord with the HYM model. Aw and Lee (2008) investigated the data of Taiwanese firms and presented that the productivity of Taiwanese firms, whether investigating in the United States or in the mainland of China, exhibited consistent pattern with the prediction of HYM model. In addition, firms investing only in the U.S. had higher productivity than those investing exclusively in China due to the lower fixed investment cost in China. Ryuhei and Takashi (2012) utilizing the Taiwanese firms5 data as well, revealed some new evidence: first, firms conducting OFDI in high-income countries are more productive than those in low- income destinations, but not definitely more efficient than non-OFDI firms; second, the more productive, the more destinations they invest regardless of the market attributes. This paper also suggested that developing countries can speed up the internationalization of firms by lowering the productivity cutoff of OFDI through government backup.
Recently, the relationship between Chinese firms,productivity heterogeneity and their OFDI activity has been a hot topic among researchers both at home and abroad. Wang and Zhao (2012) based on the firm-level data of Guangdong province, found that OFDI firms tended to be more productive, which was in line with the HYM?s theoretical model. In addition, the more productive the OFDI firms, the more countries they invested in. Based on firms5 data of Zhejiang province, Tian and Yu (2012) also found similar results which further showed that the more productive the OFDI firms were, the larger the volume they invested. Xiao and Xiao and Liu (2012) by using Chinese firms’ data (2000〜2010) and incorporating geographic factor into the model, found that OFDI firms with higher productivity were more able to invest further, while less productive firms are more likely invest in adjacent countries. Chen and Tang (2014) found that OFDI was associated with better firm performance, including higher productivity, employment, export intensity, and greater product innovation, but over half of OFDI deals resided in service sectors. Chen (2014) specifically examined the OFDI in service sectors and found that the HYM theory was also applicable to service industries. Jiang(2015), by testing Chinese firms5 data, found not only the supportive evidence towards the firm heterogeneity theory but also additional features: first, firms investing high-income destinations were not necessarily more productive than those just investing low-income countries; second, more efficient OFDI firms were more technology- seeking-oriented relative to expanding their market share in host countries; third, state-owned OFDI firms were not definitely more productive than other OFDI firms with different
ownership.
On the basis of the current literature on Chinese firms5 OFDI behavior, there still remain two major concerns requiring further investigation. One is the issue related to ownership. State-owned firms, who possess specific ownership advantages and “dual motivation”,have predominately conducted over half of China5 s OFDI. As presented in previous documents, the encouragement and support from the government may lower the productivity cutoff of OFDI, resulting in some unqualified firms investing abroad. Because state-owned firms tend to be easier to get access to the financial credit from state-owned banks or other external financial sources and are more likely to be sheltered by government policies compared with private firms. In addition, productivity, capital intensity, and labor intensity vary from industry to industry, which could also affect the productivity cutoff of OFDI. For instance, the high-tech industry definitely requires a higher productivity threshold than the labor- intensive manufacturing industry. Therefore, the inter-industry distinctions cannot be ignored, and we need to give more insights into the intra-industry OFDI activity.
1.3Impacts of OFDI on firms’ Productivity
Productivity, as an important indicator of efficiency, has been referred to as the driving force of the firm^ sustained competitiveness and growth (Lieberman & Dhawan, 2005; Syverson, 2011). Thus, it is vital for emerging economies to catch up with the advanced world (Kharas & Kohli, 2011). At present, the study on productivity inequality across firms has come a long way (Bartelsman & Doms, 2000) and a large and growing body of literature has been seeking to identify the factors affecting firm^ productivity from various angles and fields, especially the levers that firms can utilize to increase their productivity (Bertrand & Capron, 2015; Syverson, 2011). OFDI, one of those levers, has been utilized as a mechanism by which firms can not only exploit ownership advantages, but also gain resource variety, fulfill resource reallocation, stir up competition, and facilitate the development of productivity (Bertrand & Capron, 2015; Cantwell, 1989; Dunning, 1988; Frost, 2001).
Due to the accessibility of firm-level data, the majority of early literature examining the productivity effect of OFDI on the home country just focuses on the practice of developed countries from the macro-level perspective. Potterie and Lichtenberg (2001) estimated the technology spillover effects of trade, IFDI, and OFDI by using country-level panel data of 13 developed countries from 1971 to 1990. The empirical results showed that OFDI flowing into countries with advanced technology indeed had positive effects on the productivity of the home country by absorbing technological knowledge from the host country. Driffield,
Love, and Taylor (2009) showed that both efficiency-seeking OFDI and technology-sourcing OFDI would strengthen domestic productivity. Hezer (2011) also revealed that, by and large, OFDI was beneficial to the productivity of developing countries in the long run.
As for the industry-level studies, by utilizing the data of the Swedish manufacturing industry, Braconier, Ekholm, and Knarvik (2001) hardly found any indication of FDI-related R&D spillovers. Bitzer and Kerekes (2008) reported that host countries of FDI got remarkable benefits from the knowledge of spillovers of IFDI, while little positive OFDI-led technology souring effects were found. Further, by investigating a similar dataset Bitzer& Gorg, (2009) even found that on average, a country^ stock of OFDI had a negative correlation with its productivity. However, Driffield and Chiang (2009) unveiled that there indeed existed a positive correlation between Taiwan’s OFDI to mainland China and its labor productivity.
Compared with analysis with country-level and industry-level data, firm-level study is deemed to be more rigorous for exploring the productivity effect of OFDI as it is free from the constraints of aggregation bias (Holz, 2004) and offers perspectives for discerning firm heterogeneity (Helpman et al., 2004), contributing to providing more insights into firm-level variations in OFDI-led productivity effect. Barba Navaretti and Castellani (2004) found that in contrast with domestic firms, OFDI of Italian multinationals improved their total factor productivity growth by adopting the propensity matching score method. Branstetter (2006) also confirmed that OFDI was a channel of knowledge spillover for Japanese MNEs investing in the United States. Hijzen et al. (2007) suspected the positive results might result from the neglect of endogeneity bias that probably could emerge when more productive firms self-select into going abroad. To address this problem, Hijzen et al. (2007) employed propensity score matching and difference-in-difference techniques to examine the Japanese firms’ data from 1995〜2002, however, they failed to find a significant positive impact of OFDI on productivity.
Despite the fact that there is a bulk of empirical studies coping with the productivity effect of OFDI in developed countries, by contrast, this topic in developing countries is still under-researched. There are a few scattered attempts based on micro-level data from Taiwan, mainland China, and Estonia, but the empirical results of these investigations are still miscellaneous.
Therefore, what are the reasons behind those controversial results even based on similar firm-level datasets and estimation methodologies? Helpman et al. (2004) proposed that firm- level specific features may well diversify firms5 investment strategy and performance.
Kokko and Kravtsova (2008) also affirmed that it is not automatic for productivity premium and technology diffusion. Firms that have higher R&D and absorptive capability and invest in relatively developed countries/regions tend to obtain higher productivity premium. (Dosi, 1988; Kim, 1997; Almeida & Kogut, 1997; Cantwell & Janne, 1999; Cohen & Levinthal, 1990). Besides, the diverse ownership of parent firms (Ramasamy et al., 2012) and OFDI destination (Branstetter, 2006; Li, 1995; Nocke & Yeaple, 2007) may significantly moderate emerging country’s multinational enterprises (EMEs)’ leaming-by-OFDI effect. At present, however, there has been no comprehensive report on how the firm-level heterogeneity moderates the OFDI-led productivity effect. (Almeida & Kogut, 1997; Bitzer & Kerekes, 2008; Branstetter, 2006; Chen & Yang, 2013; Chuang & Lin, 1999; Potterie & Lichtenberg, 2001; Herzer, 2008)
In the context that China is one of emerging market economies and increasing Chinese companies are going abroad, whether Chinese firms5 OFDI has improved their productivity and competence or not is an urgent question requiring more systematic research on their OFDI behavior. By introducing and testing an extended learning-by-OFDI model, which takes Chinese firms5 heterogeneity into consideration, this paper attempts to shed more light on this topic. Theories related to developing countries MNEs5 OFDI will be employed as the theoretical foundation for this work. The analytic framework is demonstrated in Fig 1, which can be more robust to explain and predict the Chinese MNEs5 OFDI-productivity effect.
A summary of the preceding study results on the productivity effect of OFDI at the firm- level has been displayed in Table 3.

Chapter Four Impacts of OFDI on Firms’ Productivity
The previous chapter mainly aims to resolve the following questions: (1) Which kind of firms have a higher propensity for investing abroad; (2) Is there any ex-ante productivity disparity between firms investing in high-income countries and those investing in low-middle income countries, which are the antecedent features of Chinese firms when they decide to engage in OFDI. On this basis, this chapter will shift our focus onto the OFDI-led productivity effect, since productivity has widely been perceived as a determinant of firms9 sustained competitiveness and survival. China, as an emerging market country, its firms5 competitiveness is still inferior to that of developed countries5 firms in general as a whole. Chinese firms have been are increasingly going global in the recent decade, seeking strategic resources such as R&D, technology and human capital of developed countries. Thus, under this circumstance, the core of this chapter is to verify whether Chinese MNEs OFDI is beneficial to their productivity growth.
4.1 Transmission mechanism of OFDI and hypothesis
This section is mainly to summarize the transmission mechanisms for how OFDI will affect firms5 productivity. Based on previous literature, five mechanisms are adopted to enhance firms9 productivity through OFDI, specifically including economies of scale, coordination mechanism, learning effect, cross-border M&As, and joint R&D mechanism.
4.1.1Economies of scale
Companies can achieve economies of scale by increasing production and lowering costs when production becomes efficient. How does a firm fulfill the economies of scale through OFDI? Export! Lispey and Wesis (1981), Blonigen (2001), Fontagne and Pajot (2002) by using the data from the U.S., Japan, and France respectively, they founded that OFDI and export were mutually complementary, which verified that OFDI seemed to enhance export. In addition, China^ domestic empirical research evidence also supported this contention. The increase of export will undoubtedly elevate firms9 output, and the increase of output will inevitably reduce the fixed cost of per unit product, so the effect of scale economy of enterprises come into being. Further, the reduction of fixed cost per unit product not only apportions the cost of R&D but also improves the productivity of enterprises.
4.12 Profit feedback mechanism
Firms5 productivity improvement is mainly driven by technology upgrade, while
49
technology upgrade benefits form R&D investment and technology innovation, both of which, requires massive monetary and human capital input. Then, how do the overseas subsidiaries contribute to enhancing parent firms5 productivity? The significance of foreign subsidiaries5 capabilities to develop, create and integrate knowledge via both their internal and external networks has been underlined in the international management literature (Andersson et al., 2002; Phene and Almeida, 2008). According to Ambos and Schlegelmich (2007),foreign subsidiary’s role can be categorized into three types: (1) units that adapt products to local market needs, (2) units that exploit the MNEs9 technological competencies on a global basis, and (3) units established to augment or create new technological competencies abroad. Sorts of typologies of these roles have been utilized in existing studies. The conceptualization of foreign units used here is adopted from Ghoshal (1986), and they are subsequently referred to as (1) implementer subsidiaries, (2) contributor subsidiaries and (3) innovator subsidiaries. In terms of the first type of subsidiary, they just follow the command of the parent firm and strive to cater to the local tastes. Their contribution to parent firms’ productivity improvement is to make as many as profits for R&D and technology innovation investment. Thus, the profit feedback mechanism is mainly applied to the implementor subsidiaries.
4.13 Learning effect and reverse knowledge transfer
Apropos of contributor and innovator subsidiaries, especially when they are established in advanced countries, they can get access to the advanced technology, product information, managerial tactics and integrate into a vigorous and innovative environment. Thus, no matter by learning, absorbing these external advantages or by creating new technology or new product in such an innovative environment and then transferring them back to their parent firms, they can help parent firms to escalate their productivity. Potterie and Lichtenberg (2001) discovered that investment in R&D-intensive countries contributed to productivity growth in home countries. They contended that home countries can benefit from the reverse spillover effect of technology through OFDI. Regarding product innovation, developed countries such as Europe and the United States were the birthplace of the latest products in the world. Investment in these countries would help enterprises learn and absorb the latest product design, customer demand, and future innovation directions, and then promote enterprises to carry out relevant R&D and innovation. Finally, advanced management and marketing skills. Developed countries are not only the providers of advanced technology and the latest products but also the cutting-edge business and management models. Thus, exposing to such a vigorous business environment, firms will learn to optimize their own management, marketing skills and business models.
Blomstrom et al (2000) revealed that Japanese firms5 investment in developed countries like Europe and the U.S. were conducive for them to learn technology and product innovation, and then to ameliorate their productivity and the industrial restructuring.
4.1.4Purchase and cross-border merger and acquisitions
For later-comer countries, the most straightforward way to obtain the advanced technology of developed countries is to purchase and cross-border M&As. For instance, Chem China acquired Syngenta in 2017, a Swiss agrochemical and seed company, with a total value of $43 billion; Midea Group, a Chinese household appliance manufacturer, has always attached great importance to industrial robotics. In 2016, he offered to buy Kuka Group, a German manufacturer of industrial robots with €4.5 billion; Qingdao Haier acquired the household appliances department of American company General Electric. This enables acquirers to directly learn and absorb the advanced technology of foreign enterprises, quickly narrow the technological gap with foreign companies, and then improve their productivity. Branstetter (2006) found that the number of patents filed by Japanese firms has increased significantly after the M&As of American firms, which showed that Japanese enterprises promoted their technological progress after learning, absorbing and mastering the technology of American enterprises. Pradhan and Singh (2017) studied the impact of cross-border M&As on the automotive industry. The results evidenced that Indian automotive companies5 cross-border M&As had successfully integrated foreign R&D resources and advanced technology, thus promoting the productivity of the Indian automotive industry.
4.15 Joint research and development
Joint R&D refers to R&D activities that are jointly invested by enterprises from two or more nations. Joint R&D generally affects enterprise productivity through three channels. Firstly, joint R&D can help to absorb high-quality R&D resources from developed countries. Developed countries possess a better innovation environment, human resources, and technological level. Joint R&D is conducive for late-developing enterprises to make use of these high-quality resources to promote their productivity progress. For example, Lenovo Group has set up a joint R&D center in Silicon Valley of the United States, employing local R&D technicians and utilizing local technology and equipment for R&D innovation. Huawei has set up several joint innovation centers in Europe, America, and other developed countries. Secondly, joint R&D may well promote parent firms5 technological progress through reverse technology transfer, which enables the parent companies to quickly master the advanced technology, and then elevate their productivity. Thirdly, Joint R&D among enterprises is conducive to reducing R&D costs and risks, thus it will help enterprises to carry out more R&D activities, and then promote the technological progress.
To sum up, OFDI can enhance firms’ productivity through the above mechanisms, however, it is also a risky activity as the previous discussion we mentioned in Chapter two. Thus, whether Chinese firms OFDI is conducive for their productivity is worthy of shedding more light.
4.2Data and Methodology
42.1Data and variables
The dataset utilized in this chapter is consistent with that of the previous chapter, but here the author just selects those firms only started to invest in 2012 and those firms never had OFDI activity into the sample to avoid the learning effect. Further, to cope with the endogeneity and self-selected bias, the author used the propensity score matching method picked out a more qualified sub-sample. In total there are 649 firms started to invest abroad in 2012. Regarding the variables, besides those variables representing firms5 characteristics, firms9 knowledge absorptivity is also taken into consideration, which is measured by the ratio of a firm^ TFP and the leading firm^ TFP in this industry. It is suggested that technology diffusion is not automatic and firms need to possess basic technical knowledge to adopt advanced technology (Glass and Saggi, 2000 ; Zahra and Hayton, 2008). In accordance with this view, firms near the technological frontier tend to have greater capacities to identify, assimilate, and exploit other firms’ technology.
422 Methodology
The main challenges for unraveling the causality between firms5 productivity mark-up and their OFDI behavior are endogeneity and self-selected bias, as firms with high productivity are more likely to undertake OFDI. Thus, the simple least square estimation might be untenable. Enlighted by previous studies, the author uses propensity score matching (PSM) method, which creates the missing counter facts of firms that have foreign subsidiaries, to pick out the OFDI firms and non-OFDI. It does so by paring up a firm that undertakes OFDI with a non-OFDI firm on the basis of the similar pre-OFDI observable firm characteristics that have explanatory power in firms OFDI decision, such as TFP, capital intensity, returns on sales, firm age, and export status. Then to cope with the causal effect between OFDI and firms5 productivity growth, the author utilizes the difference-in-difference (DID) approach. Based on the logic of PSM and
DID, the sample is divided into treatment group (firms only started to invest abroad in 2012) and control group (firms have never done OFDI during this period), by which the OFDI-led productivity effect can be captured by the average treatment effect on the treated (ATT).
EiAtfpilofdii = 1) = E(itfpls\ofdi = 1) - E{tfp°is\ofdi = 1) (4.1)
where the dummy variable ofdi means whether a firm has OFDI or not, ofdi=l means a firm starts to invest abroad, and ofdi=0 means a firm has no OFDI; The base period of a firm^ OFDI is denoted 0, and s>0 denotes the number of the year after a firm starts to invest abroad. t/p& denotes the productivity if a firm begins to undertake OFDI, and t/p& means the pre- OFDI productivity. The crux of getting the ATT is to find out the counter facts of the treatment group, namely, the control group by employing the propensity score matching method. Because E(tfpis\ofdi = 1), in fact, is unobservable after a firm has conducted OFDI. On the basis of the information (TFP, capital intensity, returns on sales, firm age, and export status) prior to the year when a firm started to invest abroad, we use the logit model to predict the propensity score of each firm. If the balancing condition is satisfied, the kernel matching method is to adopted to find out the counterfactual observations. There are 649 firms starts to invest abroad in 2012, and the ratio OFDI firms and non-OFDI firms is 1:3. The matching results are presented the following tables and figures :

Table 13 shows the mean difference of matching variables between raw data and matched data, where the mean difference of matching variables in the treated groups becomes smaller compared with that in the untreated groups except for export status. Table 14 presents the variance ratio of matching variables between raw data and matched data, similarly, except for the export status and the industry, the variance ration of matching variables in the treated group is less than that in the untreated group. Figure 15 and Figure 16 respectively exhibit the distribution patterns of the propensity score of the treated and untreated observations in the raw data and matched data.
After obtaining the matched control group, we combine the PSM and DID method to get a more precise estimation of the OFDI-led productivity effect. If the productivity growth of the treatment group after OFDI is systematically higher than that of the control group, then it is strongly evidenced that firms5 OFDI has a positive impact on their productivity growth. The DID model is as follows:
^fPit - + Prdu + p2 dt + p3 du dt + sit (4.2)
tfpit and £it respectively denote firms5 productivity and the error terms, and E (£it)=0. du, is a dummy variable, denoting whether a firm start to invest or not; du-l represents the treated group, namely firms with OFDI record, while du=0 means firms have never conducted OFDI. dt represents the time dummy variable, dt=l means the period when a firm starts to investment, and dt=0 means the period before firms5 first OFDI. The implication of each coefficient is presented in table 15. In equation (4.2), the productivity of the treated group before and after OFDI are (BO+B) and (BO +B1+B2+B3), thus the productivity difference of the treated group

before and after OFDI is (P2+P3). Similarly, the productivity difference of the control group is (P2). Thus, the difference of productivity growth of the OFDI firms and non-OFDI firms is (P3), which is presented as the following equation:
h = E(Atfp\du = 1) - E(Atfp\du = 0) = (^2 + /?3) - (^2) (4.3)
Table 15 The coefficients of equation (4.2)


Thus, /33 , the coefficient of the interaction term in equation (4.2), captures the impact of OFDI on firm^ productivity growth. If > 0 , it proves that the productivity mark-up of OFDI firms is greater than that of non-OFDI firms. Out of the concern of robustness check and on the basis of the antecedent research the author takes other control variables and fixed effects into the equation (4.2), where control variables include capital intensity, firm size, firm age, export, fdi, and absorptive capability and fixed effects consist of regional effects and industrial effects.
4.3Estimation results and analysis
4.3.1Initial test
Based on the matched sample and the DID method, the author conducts the initial tests on the model in equation (4.2). Table 16 displays the estimated results. At the very beginning, the control variables are excluded, and then we gradually add the control variables, regional and industrial fixed effects. The key independent variable is did, namely the interaction item du^dt. From the test results column (1) and (2), the coefficients of did are significantly positive. After adding additional control variables, the coefficients and significance are still robust, which shows that the productivity growth rate of OFDI firms is larger than that of non-OFDI firms. Thus, it suggests OFDI has a significant positive on firms5 productivity mark-up. Due to the variations among regions and industries, firms5 productivity may be affected. For example, differences in market size, external market demand, and supply of specific factors among regions may affect enterprise productivity; the productivity of high-tech industries may be higher than that of traditional industries. From column (3) to (4), the coefficient of did is still significantly positive, which again shows that the OFDI has significantly promoted the productivity of Chinese MNEs.
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