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Artificial intelligence and outward foreign direct investment: Evidence from China

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  • Huang, Keqi
  • Liu, Qiren

Abstract

We investigate the impacts of robot adoption (a representative form of artificial intelligence) on outward foreign direct investment (OFDI) by firms in China. First, we construct a unique firm-level dataset of A-share listed firms and conduct empirical analysis by adopting a staggered difference-in-differences (DID) strategy. Second, we find that changes in robot adoption on both the extensive and intensive margins encourage firms to conduct more OFDIs. Specifically, robot adoption has positive effects on multidimensional categories of OFDI but has no significant impact on buying OFDI. Third, we explore the underlying mechanism to show that the rise in output and growth of total factor productivity (TFP) matter. Fourth, we conduct a series of empirical tests to check robustness and obtain consistent results. Finally, we analyze the heterogeneous effects and find that adoption firms with state-owned ownership or higher profit tend to send more OFDI projects, especially to the Organization for Economic Co-operation and Development (OECD)-rich countries. Our findings elucidate the impact of robot adoption on OFDI at the firm level in developing and transition countries.

Suggested Citation

  • Huang, Keqi & Liu, Qiren, 2024. "Artificial intelligence and outward foreign direct investment: Evidence from China," Journal of Asian Economics, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:asieco:v:92:y:2024:i:c:s104900782400040x
    DOI: 10.1016/j.asieco.2024.101745
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    More about this item

    Keywords

    Artificial intelligence; Industrial robots; Difference-in-differences; Outward foreign direct investment; OECD;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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