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The contribution of outward direct investment to productivity changes within China, 1991-2007

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  • Zhao, Wei
  • Liu, Ling
  • Zhao, Ting
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    Abstract

    There has been a marked growth in recent years in outward direct investment (ODI) by developing countries, and in particular, by China. Previous studies have examined the impact on developing countries productivity of foreign direct investment (FDI) from developed countries. This paper looks at the effects of China's outward direct investment on growth in its own productivity, and at two specific reasons for this growth: technology sourcing and improvements in efficiency. These are examined using data from China's ODI in eight developed countries during the period 1991 to 2007. It appears that Chinese outward direct investment has had beneficial spill-over effects in improving total factor productivity growth over the period of the study, and that gains in efficiency have been the chief reason for this. Our vector auto regression (VAR) decomposition analysis also suggests that domestic R&D capital stocks are the most important source of productivity growth with greater contribution to technological progress. China is likely to continue to expand its ODI and it will be interesting to see whether the productivity gains continue at the same rate, and whether other developing countries also increase their ODI and reap the same benefits.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Management.

    Volume (Year): 16 (2010)
    Issue (Month): 2 (June)
    Pages: 121-130

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    Handle: RePEc:eee:intman:v:16:y:2010:i:2:p:121-130

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    Related research

    Keywords: China Outward Direct Investment Spill-over effects Technology sourcing Total factor productivity;

    References

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    Cited by:
    1. Dong, Baomin & Guo, Guixia, 2013. "A model of China's export strengthening outward FDI," China Economic Review, Elsevier, vol. 27(C), pages 208-226.
    2. Lamin, Anna & Dunlap, Denise, 2011. "Complex technological capabilities in emerging economy firms: The role of organizational relationships," Journal of International Management, Elsevier, vol. 17(3), pages 211-228, September.
    3. Stoian, Carmen, 2013. "Extending Dunning's Investment Development Path: The role of home country institutional determinants in explaining outward foreign direct investment," International Business Review, Elsevier, vol. 22(3), pages 615-637.
    4. Wei, Yingqi & Zheng, Nan & Liu, Xiaohui & Lu, Jiangyong, 2014. "Expanding to outward foreign direct investment or not? A multi-dimensional analysis of entry mode transformation of Chinese private exporting firms," International Business Review, Elsevier, vol. 23(2), pages 356-370.

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