How does FDI affect enterprises' OFDI through trade networks?

Lifan Shi, Xing Li and Xi Chen

International Review of Economics & Finance, 2025, vol. 97, issue C

Abstract: This study leverages Chinese inter-firm transaction data from 2010 to 2021, complemented by the "Qichacha" platform, to construct a new dataset on the linkages between listed enterprises and foreign-invested enterprises in the supply chain, examining the impact of foreign capital on enterprises' OFDI through trade networks. Results show that suppliers can significantly promote their OFDI by establishing trade relationships with foreign-invested enterprises, the result that holds up under rigorous robustness testing. Moreover, the innovation chain channel, information chain channel, and funding chain channel are important avenues for foreign capital to promote suppliers to undertake OFDI. Further analysis reveals that the effect of foreign capital on suppliers' OFDI through trade connections is more pronounced in enterprises with higher levels of risk-taking and superior ESG performance. These findings not only enrich the theories of FDI and OFDI within the context of developing nations, but also provide policy implications for developing and emerging countries to leverage foreign capital more effectively to enhance the global outreach of local enterprises within domestic trade networks.

Keywords: FDI; Trade networks; Supply chains; OFDI; Technology spillovers (search for similar items in EconPapers)
JEL-codes: D22 F21 F23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:97:y:2025:i:c:s1059056024007792

DOI: 10.1016/j.iref.2024.103787

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