IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i4p2339-d503409.html
   My bibliography  Save this article

Economic Policy Uncertainty, Outward Foreign Direct Investments, and Green Total Factor Productivity: Evidence from Firm-Level Data in China

Author

Listed:
  • Yuegang Song

    (School of Business, Henan Normal University, Xinxiang 453007, China)

  • Feng Hao

    (School of Economics, Tianjin University of Commerce, Tianjin 300134, China)

  • Xiazhen Hao

    (School of Business, Henan Normal University, Xinxiang 453007, China)

  • Giray Gozgor

    (Faculty of Political Sciences, Istanbul Medeniyet University, Kadıköy/İstanbul 34720, Turkey)

Abstract

This paper uses Chinese firm-level data to investigate the effect of China’s outward foreign direct investment (OFDI) on green total factor productivity (GTFP) under economic policy uncertainties (EPU). We found a significant positive impact of OFDI on GTFP. Moreover, an increase in EPU was shown to decrease GTFP. We also found that OFDI positively contributes to GTFP for private firms and foreign-invested firms in China. Technology-seeking OFDI contributes greater to GTFP than resource-seeking OFDI and market-seeking OFDI. These results remain robust when considering OFDI from firms in Central and East China as well as Western China. The findings are also robust with green labor productivity (GLP) substituting for GTFP using different econometric techniques. We also discuss potential implications in enhancing green innovation performance and sustainable industrial development in China.

Suggested Citation

  • Yuegang Song & Feng Hao & Xiazhen Hao & Giray Gozgor, 2021. "Economic Policy Uncertainty, Outward Foreign Direct Investments, and Green Total Factor Productivity: Evidence from Firm-Level Data in China," Sustainability, MDPI, vol. 13(4), pages 1-16, February.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:4:p:2339-:d:503409
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/4/2339/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/4/2339/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Muhlis Can & Giray Gozgor, 2018. "Effects of export product diversification on quality upgrading: an empirical study," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(3), pages 293-313, April.
    2. Priit Vahter & Jaan Masso, 2007. "Home versus Host Country Effects of FDI: Searching for New Evidence of Productivity Spillovers," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(2), pages 165-196.
    3. Kyle Handley & Nuno Limão, 2018. "Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 5, pages 123-175, World Scientific Publishing Co. Pte. Ltd..
    4. Gozgor, Giray & Can, Muhlis, 2016. "Does Export Product Quality Matter for CO2 Emissions? Evidence from China," MPRA Paper 71873, University Library of Munich, Germany.
    5. Nigel Driffield & James Love & Karl Taylor, 2008. "Productivity and Labour Demand Effects of Inward and Outward FDI on UK Industry," Working Papers 2008001, The University of Sheffield, Department of Economics, revised Jan 2008.
    6. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    7. Feng, Ling & Li, Zhiyuan & Swenson, Deborah L., 2017. "Trade policy uncertainty and exports: Evidence from China's WTO accession," Journal of International Economics, Elsevier, vol. 106(C), pages 20-36.
    8. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    9. Kang, Wensheng & Lee, Kiseok & Ratti, Ronald A., 2014. "Economic policy uncertainty and firm-level investment," Journal of Macroeconomics, Elsevier, vol. 39(PA), pages 42-53.
    10. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
    11. Shireen AlAzzawi, 2012. "Innovation, productivity and foreign direct investment-induced R&D spillovers," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(5), pages 615-653, August.
    12. Cozza, C. & Rabellotti, R. & Sanfilippo, M., 2015. "The impact of outward FDI on the performance of Chinese firms," China Economic Review, Elsevier, vol. 36(C), pages 42-57.
    13. Bitzer, Jürgen & Kerekes, Monika, 2008. "Does foreign direct investment transfer technology across borders? New evidence," Economics Letters, Elsevier, vol. 100(3), pages 355-358, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shi Wang & Hua Wang, 2022. "Can Global Value Chain Participation Drive Green Upgrade in China’s Manufacturing Industry?," IJERPH, MDPI, vol. 19(19), pages 1-20, September.
    2. Luhao Liu & Honglin Zhou & Jiaping Xie, 2023. "Dynamic Evolutionary Analysis of the Impact of Outward Foreign Direct Investment on Green Innovation Heterogeneity—From the Perspective of Binary Innovation," Sustainability, MDPI, vol. 15(9), pages 1-15, April.
    3. Lee, Chien-Chiang & Wang, Fuhao & Chang, Yu-Fang, 2023. "Towards net-zero emissions: Can green bond policy promote green innovation and green space?," Energy Economics, Elsevier, vol. 121(C).
    4. Haoran Yang & Yaoben Lin & Yang Hu & Xueqing Liu & Qun Wu, 2022. "Influence Mechanism of Industrial Agglomeration and Technological Innovation on Land Granting on Green Total Factor Productivity," Sustainability, MDPI, vol. 14(6), pages 1-17, March.
    5. Dong, Dayong & Yang, Mo & Yang, Gaoju & Chen, Chang-Chih & Zhang, Xinyi, 2022. "Talk less and do more: Expected strategic adjustments vs. actual changes in the Chinese firms," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).
    6. Mengzhen Wang & Xingong Ding & Baekryul Choi, 2023. "FDI or International-Trade-Driven Green Growth of 24 Korean Manufacturing Industries? Evidence from Heterogeneous Panel Based on Non-Causality Test," Sustainability, MDPI, vol. 15(7), pages 1-20, March.
    7. Tong Sheng & Bingquan Fang & Xiaoqian Lu & Xingheng Shi & Chaohai Shen & Xiaolan Zhou, 2022. "The Relationship between Corporate Social Responsibility, Global Investment, and Equity Incentives," Sustainability, MDPI, vol. 14(23), pages 1-27, December.
    8. Li, Xin & Li, Zheng & Su, Chi-Wei & Umar, Muhammad & Shao, Xuefeng, 2022. "Exploring the asymmetric impact of economic policy uncertainty on China's carbon emissions trading market price: Do different types of uncertainty matter?," Technological Forecasting and Social Change, Elsevier, vol. 178(C).
    9. Junxia He & Luxia Wang & Decai Tang, 2021. "Research on Green Total Factor Productivity of Yangtze River Economic Belt Based on Environmental Regulation," IJERPH, MDPI, vol. 18(22), pages 1-17, November.
    10. Yan Li & Xiaohan Zhang & Chenxin Jin & Qingbo Huang, 2022. "The Influence of Reverse Technology Spillover of Outward Foreign Direct Investment on Green Total Factor Productivity in China’s Manufacturing Industry," Sustainability, MDPI, vol. 14(24), pages 1-17, December.
    11. Xiaoxue Liu & Fuzhen Cao & Shuangshuang Fan, 2022. "Does Human Capital Matter for China’s Green Growth?—Examination Based on Econometric Model and Machine Learning Methods," IJERPH, MDPI, vol. 19(18), pages 1-27, September.
    12. Bohan Zhang & Jianfu Ma & Muhammad Asghar Khan & Valentina Repnikova & Kseniia Shidlovskaya & Sergey Barykin & Muhammad Salman Ahmad, 2023. "The Effect of Economic Policy Uncertainty on Foreign Direct Investment in the Era of Global Value Chain: Evidence from the Asian Countries," Sustainability, MDPI, vol. 15(7), pages 1-21, April.
    13. Bai, Jiancheng & Han, Zhiyong & Rizvi, Syed Kumail Abbas & Naqvi, Bushra, 2023. "Green trade or green technology? The way forward for G-7 economies to achieve COP 26 targets while making competing policy choices," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    14. Tao Ma & Xiaoxi Cao, 2022. "FDI, technological progress, and green total factor energy productivity: evidence from 281 prefecture cities in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(9), pages 11058-11088, September.
    15. Zhaolong Wang & Yeqing Yang & Yu Wei, 2022. "Study on Relationship between Environmental Regulation and Green Total Factor Productivity from the Perspective of FDI—Evidence from China," Sustainability, MDPI, vol. 14(18), pages 1-16, September.
    16. Ho, Kung-Cheng & Shen, Xixi & Yan, Cheng & Hu, Xiang, 2023. "Influence of green innovation on disclosure quality: Mediating role of media attention," Technological Forecasting and Social Change, Elsevier, vol. 188(C).
    17. Yuee Li & Jingdong Li, 2021. "How Does China’s Economic Policy Uncertainty Affect the Sustainability of Its Net Grain Imports?," Sustainability, MDPI, vol. 13(12), pages 1-21, June.
    18. Xiaoyan Li & Jia Liu & Peijie Ni, 2021. "The Impact of the Digital Economy on CO 2 Emissions: A Theoretical and Empirical Analysis," Sustainability, MDPI, vol. 13(13), pages 1-15, June.
    19. Xiahui Che & Minxing Jiang, 2021. "Economic Policy Uncertainty, Financial Expenditure and Energy Poverty: Evidence Based on a Panel Threshold Model," Sustainability, MDPI, vol. 13(21), pages 1-12, October.
    20. Songping Zhu & Gaofeng Yu, 2022. "The Impact of Economic Policy Uncertainty on Industrial Output: The Regulatory Role of Technological Progress," Sustainability, MDPI, vol. 14(16), pages 1-18, August.
    21. Liang, Chao & Wang, Qi, 2023. "The relationship between total factor productivity and environmental quality: A sustainable future with innovation input," Technological Forecasting and Social Change, Elsevier, vol. 191(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Linjie & Liu, Xiaming & Yuan, Dong & Yu, Miaojie, 2017. "Does outward FDI generate higher productivity for emerging economy MNEs? – Micro-level evidence from Chinese manufacturing firms," International Business Review, Elsevier, vol. 26(5), pages 839-854.
    2. Xiaosong Wang & Huan Wu & Le Li & Lu Liu, 2022. "Uncertainty, GVC participation and the export of Chinese firms," Journal of Economic Surveys, Wiley Blackwell, vol. 36(3), pages 634-661, July.
    3. Yang, Zhihao & Hong, Junjie, 2021. "Trade policy uncertainty and energy intensity: Evidence from Chinese industrial firms," Energy Economics, Elsevier, vol. 103(C).
    4. Cui, Chuantao & Li, Leona Shao-Zhi, 2023. "Trade policy uncertainty and new firm entry: Evidence from China," Journal of Development Economics, Elsevier, vol. 163(C).
    5. Jie Ma & Rong Cai & Weifu Zhang, 2023. "Has the Decline in Trade Policy Uncertainty Promoted China’s Agricultural Exports?," Sustainability, MDPI, vol. 15(14), pages 1-14, July.
    6. Gnangnon, Sèna Kimm, 2020. "Tariff Volatility and Tariff Policy in Developed and Developing Countries," EconStor Preprints 223302, ZBW - Leibniz Information Centre for Economics.
    7. Yiping Sun & Xiangyi Li & Tengyuan Zhang & Jiawei Fu, 2022. "Does Trade Policy Uncertainty Exacerbate Environmental Pollution?—Evidence from Chinese Cities," IJERPH, MDPI, vol. 19(4), pages 1-21, February.
    8. Hsu, Wen-Tai & Lu, Yi & Luo, Xuan & Zhu, Lianming, 2023. "Foreign direct investment and industrial agglomeration: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 51(2), pages 610-639.
    9. Gnangnon, Sèna Kimm, 2023. "Duration of membership in the world trade organization and investment-oriented remittances inflows," The Quarterly Review of Economics and Finance, Elsevier, vol. 88(C), pages 258-277.
    10. Zhou, Kexuan & Kumar, Sanjay & Yu, Linhui & Jiang, Xinlin, 2021. "The economic policy uncertainty and the choice of entry mode of outward foreign direct investment: Cross-border M&A or Greenfield Investment," Journal of Asian Economics, Elsevier, vol. 74(C).
    11. Gnangnon, Sèna Kimm, 2022. "Duration of WTO Membership and Investment-Oriented Remittances Flows," EconStor Preprints 251274, ZBW - Leibniz Information Centre for Economics.
    12. Bianconi, Marcelo & Esposito, Federico & Sammon, Marco, 2021. "Trade policy uncertainty and stock returns," Journal of International Money and Finance, Elsevier, vol. 119(C).
    13. Liu, Feifei & He, Xinming & Wang, Tao, 2023. "In the name of the family: The effect of CEO clan culture background on firm internationalization," Journal of Business Research, Elsevier, vol. 161(C).
    14. Li, Xiaogang, 2020. "Innovation, market valuations, policy uncertainty and trade: Theory and evidence," ISU General Staff Papers 202001010800009179, Iowa State University, Department of Economics.
    15. Xiaotao Zhao & Xiaoping Chen, 2022. "Inventory Management with Trade Policy Uncertainty," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(5), pages 128-153, September.
    16. Dong Cheng & Zhongzhong Hu & Yong Tan, 2021. "Heterogeneous impacts of finance on firm exports: Evidence from export deregulation in a large developing country," The World Economy, Wiley Blackwell, vol. 44(11), pages 3326-3350, November.
    17. Chen, Lili & Guo, Shaoyu & Lu, Jian & Gerschewski, Stephan, 2021. "Outward FDI and efficiency in within-firm resource allocation – Evidence from firm-level data of China," Journal of Asian Economics, Elsevier, vol. 74(C).
    18. Liu, Qing & Ma, Hong, 2020. "Trade policy uncertainty and innovation: Firm level evidence from China’s WTO accession," Journal of International Economics, Elsevier, vol. 127(C).
    19. Yuan Gao & Yang Li & Mingxin Zhang, 2022. "On the spillover effect of China's outward FDI in Germany," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(2), pages 393-417, April.
    20. Gong, Di & Jiang, Tao & Li, Zhao & Wu, Weixing, 2022. "Optimal loan contracting under policy uncertainty: Theory and international evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2021:i:4:p:2339-:d:503409. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.