The Dragon Is Flying West: Micro-level Evidence of Chinese Outward Direct Investment

Wenjie Chen () and Heiwai Tang
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Wenjie Chen: Assistant Professor, George Washington University, School of Business and Elliott School of International Affairs

Asian Development Review, 2014, vol. 31, issue 2, 109-140

Abstract: Outward direct investment (ODI) from the People's Republic of China (PRC) is surging. A common perception is that it was driven by the country's resource-seeking and technology-seeking motives. Using a new, unique, and comprehensive dataset that covers close to 10,000 Chinese ODI deals from 1998 to 2009, we find that in contrast to the common perception, over half of the ODI deals are in service sectors, with many of them appearing to be export-related. In addition to documenting the pattern and trend of the PRC's ODI, we empirically examine both the determinants and effects of ODI at the firm level. We find that ex ante larger, more productive, and more export-intensive firms are more likely to start investing abroad. Using matching estimation techniques, we find that ODI is associated with better firm performance, including higher total factor productivity, employment, and export intensity, and greater product innovation. To assess the relative contributions of technology transfer, export promotion, and resource seeking to the positive effects of ODI, we use ODI data merged with customs transaction-level trade data. We find that firms’ ODI participation is associated with significantly better trade performance, measured by export and import volumes, export and import unit values, and number of export destinations. Contrary to perceived technology-seeking and resource-seeking motives, we find no evidence that ODI firms import more capital or intermediate inputs compared to non-ODI firms. © 2013 Asian Development Bank and Asian Development Bank Institute.

Keywords: Outward direct investment; ODI; export; technology (search for similar items in EconPapers)
JEL-codes: D01 F17 F18 F61 L00 L10 O10 O19 P00 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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