Estimating the Ex-ante and the Ex-post Effects of Chinese Outward FDI

Donatella Baiardi, Valeria Gattai and Piergiovanna Natale

No 469, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: This study investigates the relationship between outward Foreign Direct Investment (FDI) and the performance of Chinese enterprises. Using firm-level panel data over the period 2008–2014, we introduce a taxonomy of outward FDI that accounts for the decision to invest abroad and the location of foreign affiliates. Through different specifications, we show systematic differences in performance between FDI starters and non-starters two years before and two years after the first investment by the starters. This fact points to the existence of strong ex-ante and ex-post effects of Chinese outward FDI. On one hand, we provide evidence — so far not present in the literature — that the best performing Chinese firms self-select into outward FDI. On the other hand, controlling for endogeneity through propensity score matching (PSM) techniques, we detect significant learning effects from outward FDI to firm-level performance. Interestingly, these effects are heterogeneous with respect to destination, with deeper learning for Chinese enterprises investing in Asia.

Keywords: FDI; China; ex-ante effects; ex-post effects; panel data (search for similar items in EconPapers)
JEL-codes: F23 L25 O53 (search for similar items in EconPapers)
Pages: 44
Date: 2021-06, Revised 2021-06
New Economics Papers: this item is included in nep-cna, nep-int, nep-sbm and nep-sea
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