Outward FDI from China: Internal Motivations, Institutional Context, and Firm Sustainability
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In the context of deepening globalization, Chinese firms’ outward foreign direct investment (OFDI) has become not only a critical pillar of China’s internationalization strategy but also an increasingly influential driver of sustainable global economic development. This study investigates the key determinants of Chinese firms’ OFDI and its implications for firm-level performance. Our empirical findings suggest that firms with higher resource allocation efficiency, a greater proportion of executives with international experience, and those at more advanced stages of the corporate life cycle are more inclined to engage in OFDI. Moreover, OFDI activities significantly boost firms’ total factor productivity (TFP), generating positive and persistent effects on innovation and competitiveness. Nonetheless, we also identify a potential trade-off: OFDI may reduce firms’ short-term return on investment (ROI). Heterogeneity analysis indicates that these effects are more pronounced in regions with higher marketization levels and among state-owned enterprises. These insights contribute to a deeper understanding of how international investment strategies can align with long-term sustainable development goals, providing practical implications for policymakers and corporate leaders seeking to enhance the global competitiveness and resilience of Chinese enterprises.
Abstract
In the context of deepening globalization, Chinese firms’ outward foreign direct investment (OFDI) has become not only a critical pillar of China’s internationalization strategy but also an increasingly influential driver of sustainable global economic development. This study investigates the key determinants of Chinese firms’ OFDI and its implications for firm-level performance. Our empirical findings suggest that firms with higher resource allocation efficiency, a greater proportion of executives with international experience, and those at more advanced stages of the corporate life cycle are more inclined to engage in OFDI. Moreover, OFDI activities significantly boost firms’ total factor productivity (TFP), generating positive and persistent effects on innovation and competitiveness. Nonetheless, we also identify a potential trade-off: OFDI may reduce firms’ short-term return on investment (ROI). Heterogeneity analysis indicates that these effects are more pronounced in regions with higher marketization levels and among state-owned enterprises. These insights contribute to a deeper understanding of how international investment strategies can align with long-term sustainable development goals, providing practical implications for policymakers and corporate leaders seeking to enhance the global competitiveness and resilience of Chinese enterprises.