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The impact of outward FDI on the performance of Chinese firms

Author

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  • Cozza, C.
  • Rabellotti, R.
  • Sanfilippo, M.

Abstract

Using new firm-level data from the Emerging Multinationals' Events and Networks DATAbase (EMENDATA), this paper investigates the effects on Chinese firms of Outward FDI (OFDI) into advanced European countries. Propensity score matching is combined with a difference-in-difference (DiD) estimator to reduce the problem of self-selection of treated firms in foreign markets, and to eliminate time-invariant and unobservable differences between those firms and the controls. The results provide robust evidence supporting the view that China's OFDI so far have had a positive impact on domestic activities in enhancing firms' productivity and scales of operation, measured by sales and employment. When we distinguish among investments on the basis of entry mode, accounting for endogeneity in the selection process, acquisitions facilitate early access to intangible assets, but are detrimental to financial performance, while greenfield investments have a stronger impact on the scale and productivity of Chinese multinationals investing in Europe.

Suggested Citation

  • Cozza, C. & Rabellotti, R. & Sanfilippo, M., 2015. "The impact of outward FDI on the performance of Chinese firms," China Economic Review, Elsevier, vol. 36(C), pages 42-57.
    • Handle: RePEc:eee:chieco:v:36:y:2015:i:c:p:42-57
    DOI: 10.1016/j.chieco.2015.08.008
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    More about this item

    Keywords

    Outward FDI; Reverse spillovers; Performance; Acquisitions; Chinese multinationals;
    All these keywords.

    JEL classification:

    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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