FDI, Financing Constraints, and Firms’ Global Value Chain Position

Yishu Liu, Mingwei Du, Yanping Zhou and Zhiming Zhang

Emerging Markets Finance and Trade, 2025, vol. 61, issue 10, 3096-3109

Abstract: This paper uses combined data from Chinese Customs Trade Data, Chinese Industrial Enterprise Data, and the World Input-Output Tables to empirically study the relationship between foreign direct investment (FDI), financing constraints, and firms’ global value chain (GVC) position. The results show that FDI significantly promotes firms’ ascension in the GVC, while financing constraints not only inhibit firms’ ascension in the GVC but also weaken the promoting effect of FDI. However, these conclusions exhibit significant heterogeneity due to differences in firm ownership, trade methods, main export destinations, firm productivity, and regional location. Additionally, compared to FDI from Hong Kong, Macao, and Taiwan regions of China, FDI from OECD countries has a stronger effect on firms’ ascension in the GVC. Moreover, financing constraints weaken the promoting effect of FDI from Hong Kong, Macao, and Taiwan, but enhance the effect of FDI from OECD countries.

Date: 2025
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DOI: 10.1080/1540496X.2025.2467206

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