 Absorptive capacity and quality upgrading effect of OFDI: Evidence from ChinaHongfeng Peng and Jingwen Yu Pacific Economic Review, 2021, vol. 26, issue 5, 651-671 Abstract: Does outward foreign direct investment (OFDI) from developing countries affect firms' competitiveness in international markets through quality upgrading of export? Using highly disaggregated Chinese product level data and the firm level information on overseas investment from 2000 to 2006, we attempt to provide an answer to this question. We employ the propensity score matching approach and difference‐in‐differences specification to deal with the sample selection bias and the potentially endogenous problem in inferring the causal effect of OFDI on quality upgrading. The results reveal that investment abroad could significantly push China export up on quality ladders. The firms with OFDI have higher quality products when compared with the firms remaining invest in their home country at product‐export destination level. This quality upgrading effect is more pronounced where firms export to high‐income countries. Furthermore, we show that the learning mechanism works and the absorptive ability of firms could reinforce the quality upgrading effect of OFDI. The learning mechanism also works for the firms with difference OFDI strategies. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:pacecr:v:26:y:2021:i:5:p:651-671 Ordering information: This journal article can be ordered from Access Statistics for this article Pacific Economic Review is currently edited by Kenneth S. Chan and Yin-wong Cheung More articles in Pacific Economic Review from Wiley Blackwell |
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