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Estimating the Ex-ante and the Ex-post Effects of Chinese Outward FDI

Author

Listed:
  • Donatella Baiardi
  • Valeria Gattai
  • Piergiovanna Natale

Abstract

This study investigates the relationship between outward Foreign Direct Investment (FDI) and the performance of Chinese enterprises. Using firm-level panel data over the period 2008–2014, we introduce a taxonomy of outward FDI that accounts for the decision to invest abroad and the location of foreign affiliates. Through different specifications, we show systematic differences in performance between FDI starters and non-starters two years before and two years after the first investment by the starters. This fact points to the existence of strong ex-ante and ex-post effects of Chinese outward FDI. On one hand, we provide evidence — so far not present in the literature — that the best performing Chinese firms self-select into outward FDI. On the other hand, controlling for endogeneity through propensity score matching (PSM) techniques, we detect significant learning effects from outward FDI to firm-level performance. Interestingly, these effects are heterogeneous with respect to destination, with deeper learning for Chinese enterprises investing in Asia.

Suggested Citation

  • Donatella Baiardi & Valeria Gattai & Piergiovanna Natale, 2021. "Estimating the Ex-ante and the Ex-post Effects of Chinese Outward FDI," Working Papers 469, University of Milano-Bicocca, Department of Economics, revised Jun 2021.
    • Handle: RePEc:mib:wpaper:469
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    FDI; China; ex-ante effects; ex-post effects; panel data;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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