Outward FDI and efficiency in within-firm resource allocation – Evidence from firm-level data of China

Lili Chen, Shaoyu Guo, Jian Lu*, Stephan Gerschewski

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

With the rapid expansion of outward foreign direct investment (OFDI) in China over the last two decades, OFDI has become an increasingly important way of internationalization for firms. This paper documents how firms’ OFDI and its different patterns may affect their internal resource allocation efficiency by adopting PSM-DID method and using firm-level data of China. Our results show that China's OFDI significantly improves the overall efficiency of resource allocation within enterprises, which has a time lag effect. Furthermore, we find that different patterns of firms’ OFDI display significant heterogeneity in their performances. All results remain robust when we replace key variables with different indexes, change the matching method, recalculate parameter, and change the sample size. The key implication of the paper is that both the value and the pattern of OFDI of Chinese enterprises do have significant influences on its internal resource allocation.

Original languageEnglish
Article number101298
JournalJournal of Asian Economics
Volume74
Early online date22 Mar 2021
DOIs
Publication statusPublished - Jun 2021

Keywords

  • China
  • Firm internationalization
  • Foreign direct investment
  • Outward FDI
  • PSM-DID
  • Resource allocation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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