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Distribution, outward FDI, and productivity heterogeneity: China and cross-countries’ evidence

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  • Tian, Wei
  • Yu, Miaojie

Abstract

This paper examines distribution-oriented outward FDI using Chinese multinational firm–level data. Distribution outward FDI refers to Chinese parent firms in manufacturing that penetrate foreign markets through wholesale trade affiliates that resell exportable goods. Our estimations correct for rare-events bias and show that distribution FDI are more productive than non-FDI firms but less productive than non-distribution FDI firms. As cross-border communications costs (transportation costs) increase, there is a higher the probability that firms engage in distribution FDI (non-distribution FDI). Our endogenous income-threshold estimates show that high-productivity Chinese firms invest more in high-income countries, but not necessarily in low-income countries.

Suggested Citation

  • Tian, Wei & Yu, Miaojie, 2020. "Distribution, outward FDI, and productivity heterogeneity: China and cross-countries’ evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:intfin:v:67:y:2020:i:c:s1042443120301025
    DOI: 10.1016/j.intfin.2020.101218
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    Cited by:

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    2. Jean‐Charles Bricongne & Sebastian Franco Bedoya & Margarita Lopez Forero, 2023. "The proximity‐concentration trade‐off with multi‐product firms: Are exports and FDI complements or substitutes?," The World Economy, Wiley Blackwell, vol. 46(5), pages 1264-1289, May.
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    4. Kui Wang & Shuang Tao, 2023. "Why Do Chinese Private Enterprises Seek Outward Foreign Direct Investment?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(4), pages 200-218, July.

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    More about this item

    Keywords

    Distribution FDI; Firm productivity; Linder hypothesis; Rare-events corrections; Threshold estimates;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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