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ESG Performance and Corporate OFDI: The Moderating Role of the Corporate Life Cycle

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  • Zhijing Wu

    (School of Economics and Management, Xiamen University Malaysia, Sepang 43900, Malaysia
    Shenzhen Research Institute of Xiamen University, Xiamen University, Shenzhen 518000, China
    Overseas Education College, Xiamen University, Xiamen 361005, China)

  • Junjie Yang

    (School of Economics and Management, Xiamen University Malaysia, Sepang 43900, Malaysia
    Shenzhen Research Institute of Xiamen University, Xiamen University, Shenzhen 518000, China
    Overseas Education College, Xiamen University, Xiamen 361005, China)

Abstract

As China has increased implementation of its opening-up strategy and the “Belt and Road” initiative, Chinese enterprises have encountered significant historical opportunities to expand their outward foreign direct investment (OFDI). However, international organizations and major nations are increasingly focusing on nonfinancial indicators for multinational corporations; as a result, enterprises frequently encounter social responsibility crises in cross-border investments. Consequently, Chinese firms must enhance their environmental, social, and governance (ESG) practices to bolster their comprehensive competitiveness, which is crucial for promoting successful international engagement and sustainability. This research explores the U-shaped relationship between ESG performance and OFDI, examining how different stages of the corporate lifecycle affect OFDI. The findings indicate that ESG investments compete with OFDI for internal resources during the introduction, growth, and decline phases, thereby inhibiting OFDI activities. In contrast, strong ESG performance in the maturity phase provides a competitive advantage in international markets, facilitating OFDI. The empirical analysis uses a fixed-effects model on a sample of Chinese A-share-listed companies from 2009 to 2022 and employs the PSM, 2SLS, and System GMM methods to test for endogeneity. The results reveal that (1) a positive U-shape relationship between ESG performance and corporate OFDI, and the inflection point occurs when the ESG score equals 69.04. Moreover, (2) the corporate lifecycle intensifies this nonlinear relationship, with growth-phase firms showing a significant inhibitory effect and mature-phase firms showing a pronounced promotional effect. Finally, (3) the U-shaped relationship between ESG performance and corporate OFDI is more pronounced in nonstate-owned enterprises. Based on these findings, this paper provides targeted policy recommendations for enterprises and governments.

Suggested Citation

  • Zhijing Wu & Junjie Yang, 2026. "ESG Performance and Corporate OFDI: The Moderating Role of the Corporate Life Cycle," Sustainability, MDPI, vol. 18(3), pages 1-34, January.
    • Handle: RePEc:gam:jsusta:v:18:y:2026:i:3:p:1231-:d:1848928
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