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Does the establishment of Pilot Free Trade Zones promote international expansion of enterprises? Quasi-natural experimental evidence from China

Author

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  • Wenqi Jing
  • Yi Zheng
  • Xiuqing Shen

Abstract

Pilot Free Trade Zones (PFTZs) are a crucial new platform for China to build a more open economic system. Existing literature primarily focuses on the ‘Bring In’ effect of PFTZs, often overlooking the importance of ‘Going Out’ aspects. To bridge this gap, this paper uses data from China’s Shanghai and Shenzhen A-share listed enterprises from 2007 to 2021 and constructs a time-varying difference-in-differences (DID) model to test the impact of establishment of PFTZs on international expansion of enterprises. The study finds that establishment of PFTZs can significantly promote international expansion of enterprises, with a more pronounced effect on the scope of international expansion than on its depth. Mechanism analysis reveals that PFTZs can facilitate international expansion of enterprises by driving digital transformation, enhancing total factor productivity and management efficiency, and alleviating financing constraints. Notably, senior managers with overseas work experience play a crucial role in enhancing this relationship. Further, PFTZs not only have a linkage effect with the Belt and Road Initiative but also a radiation effect on neighboring cities. This study provides an analytical perspective and empirical evidence for evaluating policy effects of PFTZs and offers valuable insights that will enable PFTZ policies to be refined and facilitate successful implementation of the ‘Going Out’ strategy.

Suggested Citation

  • Wenqi Jing & Yi Zheng & Xiuqing Shen, 2024. "Does the establishment of Pilot Free Trade Zones promote international expansion of enterprises? Quasi-natural experimental evidence from China," PLOS ONE, Public Library of Science, vol. 19(8), pages 1-22, August.
    • Handle: RePEc:plo:pone00:0308477
    DOI: 10.1371/journal.pone.0308477
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