Location Choice Of China's Outward Foiergn Direct Investment Under Firm Heterogeneity

In recent years, the rapid growth of China's outward foreign direct investment(OFDI) became the focus of world economic development, leading to the widespreadconcern of scholars' research and government decision-making. The balance ofdomestic and international economic structure, and enhancing the internationalcapabilities of corporate would consider China's OFDI as an important issue. Basedon the theory of firm heterogeneity and the evolution characteristics of theinternationalization of Chinese enterprises, this paper extended the theory of firmheterogeneity, summarized the ternary marginal expansion of China's OFDI, andestablished the dynamic framework of location choice by China's OFDI. Based on themicroscopic data of Chinese enterprises, this paper found the law and differenceamong the choice of China's OFDI, provided a new theoretical basis of China's OFDI,and made the scientific and healthy development from the sides of enterprises andgovernment.First of all, through the analysis of the international heterogeneity characteristicsof FDI, as well as ternary marginal expansion of China's OFDI under theheterogeneous conditions, this paper made an in-depth analysis of interaction factorsof Chinese OFDI from a macro and micro level, and built the dynamic mechanism ofChina's OFDI. In this framework, I made a logical deduction on the influencing factorof OFDI using the ternary marginal, and drawn that the number expansion, the modeexpansion and the spatial effect made a direct correlation on the location choice ofChina's OFDI. The framework of analysis have played leading role on the next threechapters.Second, based on the classic theoretical framework of firm heterogeneity, thispaper made a theoretical interpretation on the location choice of China's OFDI,showing that the most productive enterprises would choose OFDI entering the host country. Through the number analysis of marginal extension, showing that the numberof OFDI enterprises would increase as well as the increasing degree of attracting withthe host country market, and the lower the access threshold, the more enterprises toconduct OFDI. Using a sample of the Chinese enterprise to conduct an empirical test,it found that the OFDI enterprises had higher productivity, and the role of TFP wasdifferent on the different location. As the OFDI margin expansion, the higher the TFP,the more the OFDI destination, and the lower productivity threshold of the hostcountry would absorbed more China's OFDI.Third, through building the extended model of firm heterogeneity, this paperdecomposed the structure of China's OFDI, making the trade deriving OFDI (TOFDI)into the model, and took advantage of the Chinese enterprise data on differentinvestment patterns and geographical distribution. The results show that, TOFDI madethe double impact on the trade and OFDI. The basic performance was that: with thereduced costs of trade and investment, the enterprise would increase the mode ofTOFDI as accessing to overseas markets, showing the complementary relationshipbetween the total trade and investment. The decomposed OFDI and the location ofOFDI also performed significant differences.Furthermore, this paper constructed a three-country model to interpret how tochoose a different location to deal with the complex international environment. Theresearch showed that, the effect of space network was existed in China's enterprisesOFDI obviously, and enterprises more inclined to move the OFDI production areas tothe location which was near by the region that horizontal OFDI already had existed.And the market potential was also significant among the effect of enterprise spacenetwork. It means that when Chinese enterprises chose to TOFDI, they were moreinclined to take the OFDI to the location that had the larger market potential. This alsomeans that when enterprises made the expansion effect of OFDI mode, the location oflarger market potential would be the reasonable choice for the trade purpose ofTOFDI. Followed by case analysis of the internationalization of Huawei, this paperfurther illustrated the importance of network effects in the international locationchoice of multinational enterprise. Finally, based on the dynamic mechanism of OFDI location choice under theconditions of firm heterogeneity, and to the point of ternary marginal view, this paperproposed the policy recommendations from business and government levels, in orderto accelerate China's OFDI transformation from "quantity" to "quality", andpromoted the stability and healthy development of China's OFDI.