IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v85y2025icp2234-2246.html
   My bibliography  Save this article

Fair competition and investment behavior of foreign-invested firms—Evidence from a quasi-natural experiment in China

Author

Listed:
  • Huang, Xiaodi
  • Chen, Xiaoxiong
  • Liang, Zuming
  • Wu, Hongjie
  • Kang, Siyang

Abstract

This study systematically investigates the effect of fair competition on the investment of foreign-invested firms by utilizing China's Fair Competition Review System in 2016 as an exogenous shock. Particularly, we run a triple-difference regression based on the type and location of firms. The findings demonstrate that the improvement of fair competition significantly increases fixed asset investment in foreign-invested firms relative to domestic firms, particularly in firms with strong financial constraints, high operational uncertainty, high capital intensity and in regions with low financial development and high economic policy uncertainty. Further mechanism tests show that fair competition significantly promotes foreign-invested firms’ access to bank credit and reduces their perceived uncertainty, thus increasing investment, compared to domestic firms. In addition, labor employment, total factor productivity, operating income and R&D investment of foreign-invested firms have also significantly increased. Overall, our evidence highlights the active role of fair competition in promoting foreign-invested firms’ investment compared to domestic firms.

Suggested Citation

  • Huang, Xiaodi & Chen, Xiaoxiong & Liang, Zuming & Wu, Hongjie & Kang, Siyang, 2025. "Fair competition and investment behavior of foreign-invested firms—Evidence from a quasi-natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 2234-2246.
  • Handle: RePEc:eee:ecanpo:v:85:y:2025:i:c:p:2234-2246
    DOI: 10.1016/j.eap.2025.03.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592625000773
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.eap.2025.03.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Fair competition; Investment; Foreign-invested firm; Triple-difference estimation;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:85:y:2025:i:c:p:2234-2246. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.