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Can outward FDI promote export diversification for emerging economies? Firm-level evidence from China

Author

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  • Zhang, Song
  • Chen, Chunlai
  • Li, Haoze

Abstract

Recent studies have highlighted the importance of export diversification in facilitating emerging economies’ structural change and economic development. This study aims at investigating whether outward foreign direct investment (OFDI) can promote export diversification. Using a firm-product-level dataset, this study investigates empirically the impact of China's OFDI conducted by exporting firms on their export diversification both at product-level and destination-level. By employing propensity score matching (PSM) techniques and differences-in-differences (DID) analysis, this study finds that China's OFDI has a positive and statistically significant impact on promoting China's diversification of export basket, and the promotion effects vary upon different motivations of OFDI. A dynamic effect test shows that the promotion effects of OFDI are significant for several consecutive years after outward investment was made. In addition, this study also finds that the promotion effects mainly come from optimised organisational structure and improved business performance of the OFDI firms.

Suggested Citation

  • Zhang, Song & Chen, Chunlai & Li, Haoze, 2024. "Can outward FDI promote export diversification for emerging economies? Firm-level evidence from China," Structural Change and Economic Dynamics, Elsevier, vol. 68(C), pages 269-280.
    • Handle: RePEc:eee:streco:v:68:y:2024:i:c:p:269-280
    DOI: 10.1016/j.strueco.2023.10.009
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    More about this item

    Keywords

    Export diversification; Outward foreign direct investment; Trade; Emerging economies;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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