The Impact of the Outward and Inward FDI on Global Value Chains

Hang Su and Yao Fu
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Hang Su: College of International Economics and Trade, Dongbei University of Finance and Economics, Dalian, China.
Yao Fu: College of International Economics and Trade, Dongbei University of Finance and Economics, Dalian, China.

International Journal of Economics and Financial Issues, 2021, vol. 11, issue 6, 1-8

Abstract: What kind of trade agreements should a country choose? Regional trade agreements, multilateral trade agreements, or both? What s the role of a country s outward foreign direct investment (OFDI) and foreign direct investment (FDI) in its participation and position in global value chains (GVCs)? Is a country's research and development spending conducive to breaking the "low-end locking" of FDI? Based on the World Input-Output Tables (WIOTs) released in 2016, this paper computes the indicators of GVC participation and position and identifies the feature of the production division, providing a reference for promoting regional and multilateral trade agreements. This paper uses feasible generalized least squares (FGLS) and system generalized method of moments (SYS-GMM) to examine the impact of a country's outward and inward FDI on its GVC participation and position. The empirical results imply that a country's OFDI promotes its GVC participation and fosters its upgrading within industries in GVCs, while FDI inhibits the upgrading of GVCs, though it promotes a country s GVC participation. In addition, a country's research and development spending can be conducive to breaking the "low-end locking" effect of FDI.

Keywords: Outward Foreign Direct Investment; Inward Foreign Direct Investment; Global Value Chains; World Input-Output Tables; Feasible Generalized Least Squares (search for similar items in EconPapers)
JEL-codes: C33 F21 (search for similar items in EconPapers)
Date: 2021
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