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Research on the impact of OFDI on the home country's global value chain upgrading

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  • Li, Xing
  • Zhou, Wei
  • Hou, Jiani

Abstract

Based on the trade value-added accounting method proposed by Koopman et al., the "GVC Position Indices" and "GVC Participation Degree" of 64 countries from 2005 to 2015 are calculated in our paper by using the OECD-TIVA data. Then the impact of outward foreign direct investment (OFDI) on the home country's GVC upgrading is theoretically analyzed and empirically tested on this basis. Empirical results at country-specific level show that OFDI exerts a positive effect on the home country's GVC upgrading via boosting technological advancement and raising trading network status, and the impact of OFDI in emerging countries is more significant than that in developed countries; meanwhile, the empirical test using China's sub-industry data indicates that compared with low and middle-tech (LMT) industries, OFDI of high-tech (HT) industries have a stronger impact on China's GVC upgrading. Finally, we put forward suggestions on how to avoid the "low-end lock-in" risk and promote the home country's GVC upgrading through OFDI for developing countries like China.

Suggested Citation

  • Li, Xing & Zhou, Wei & Hou, Jiani, 2021. "Research on the impact of OFDI on the home country's global value chain upgrading," International Review of Financial Analysis, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:finana:v:77:y:2021:i:c:s1057521921001927
    DOI: 10.1016/j.irfa.2021.101862
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