Research On The Impact Of China’s Outward Foreign Direct Investment On Export Product Quality

More than four decades of reform and opening-up has witnessed the sustained and rapid growth of China’s foreign trade,which has made positive contributions to China’s economic development.However,as the world’s largest trader in goods,China is still at the middle and low end of the division of labor in the global value chain with large but not strong export volume.Therefore,it is particularly important to promote product exports from "aggregate growth" to "high-quality growth".With the in-depth implementation of the "go global" strategy,Outward Foreign Direct Investment(OFDI)has experienced vigorous development.It is of great importance for China to expand its opening-up level,improve the production efficiency of enterprises and the export quality of products.As a result,it is of great practical significance to further study how OFDI improves the quality,efficiency and energy of export products.Based on the perspective of corporate OFDI,this paper aims to clarify the micromechanism by which OFDI can promote the quality improvement of export products,and enrich the researches related to the export effects of OFDI.This paper attempts to answer the following questions: What are the characteristics of OFDI and export product quality in Chinese manufacturing firms? Does OFDI contribute to the improvement of export product quality?Does this effect differ between different types of OFDI? What are the mechanisms through which corporate OFDI affects the quality of export products?In order to solve the above problems,the following researches are carried out in this paper.Firstly,in the theoretical mechanism section,the relevant studies on the impact of OFDI on export product quality are sorted out.And based on the heterogeneous firm model proposed by Melitz(2003)and Anwar and Sun(2018),the impact of corporate OFDI on export product quality is theoretically analyzed.Meanwhile,the theoretical mechanism of OFDI affecting export product quality is analyzed from three perspectives: industry differences,locational differences and firm heterogeneity.In addition,based on the endogenous quality selection model proposed by Alexis Antoniades(2015),Melitz and Ottaviano(2008),the transmission mechanism of corporate OFDI promoting the quality improvement of export products through the independent innovation effect,industrial agglomeration effect,global value chain embedding effect and intermediate goods import effect is described.Secondly,the data were matched using the China Industry Business Performance Database,the China Customs Import and Export Database and the Ministry of Commerce FDI Company Directory from 2000 to2013 to identify OFDI firms during the sample period.And based on the "KSW" method proposed by Khandelwal et al.(2013),the quality of export products at the enterprise level is measured.Finally,Fixed Effect Model,Generalized Moments Estimation Model,Propensity Score Matching and Difference-in-differences Method are used to test the direct impact and heterogeneity of OFDI on export product quality.By utilizing the mediation effect model,this paper empirically analyzes the transmission mechanism of independent innovation,industrial agglomeration,global value chain embedding and intermediate goods import,and further tests the mediating effect of each transmission mechanism under different investment motivation and enterprise life cycle.Based on theoretical and empirical researches,this paper draws the following conclusions:Firstly,OFDI and export product quality have different characteristics due to industry,region and enterprise heterogeneity differences.The OFDI of technology-intensive enterprises in China is significantly higher than that of labor-intensive and other enterprises,and the OFDI of the eastern region is significantly higher than that of other regions.The growth rate of OFDI of private enterprises is relatively high,and the investment is mainly distributed in Asia.And the OFDI of market-seeking and technology-seeking enterprises shows an increasing trend year by year.In terms of export product quality,technology-intensive industries have the highest export product quality,high quality export products are mainly concentrated in the eastern coastal areas,and the export product quality to developing countries(regions)is on the rise.Secondly,corporate OFDI plays a significant role in promoting the quality improvement of export products,and the improvement effect gradually increases with time.The empirical test found that for each additional unit of enterprise OFDI,the quality of export products increases by 1.08 %.This improvement effect has a significant lag,and the lag effect is manifested as a state of first rising,then falling,and then rising again.And The effect of corporate OFDI on improving export product quality is most significant at a lag of 5 years.The effect of OFDI on export product quality of low quartile enterprises is the greatest,while that of high quartile enterprises is relatively small.Thirdly,the positive impact of OFDI on the quality improvement of export product varies significantly by industry differences,location differences and firm heterogeneity.(1)From different industries,the impact of OFDI on export product quality is most significant in hightech industries,for each unit increase in OFDI,export product quality adds by 2.12%.(2)From different locations,(1)based on the source of investment in the home country: the role of OFDI in improving the quality of export products in the eastern region is higher than in the central and western regions.(2)based on the investment location of the host country: It will have a positive impact on the improvement of export product quality when investing in OFDI to nonOECD countries,developing countries,countries along the "Belt and Road" and countries with poor institutional environment.(3)From the perspective of enterprise heterogeneity,(1)based on enterprise ownership: private enterprises and Sino-foreign joint ventures OFDI helps to improve export product quality.And the impact of state-owned enterprises(SOE)OFDI on export product quality is negative and insignificant,while the impact coefficient of wholly foreign-owned enterprises OFDI on export product quality is positive but not robust.(2)According to firm productivity: The OFDI of high-productivity firms helps to improve export product quality,while the OFDI of low-productivity firms is not conducive to the improvement of export product quality.After dividing the productivity into tenths,it is found that the impact of each tenth of labor productivity on export product quality presents an "M"-shaped fluctuation.(3)Based on factor intensity: the OFDI of capital-intensive firms is more effective in improving export product quality.Fourthly,through the mechanism analysis and empirical test of OFDI affecting export products quality,it is found that OFDI can promote the quality of export products through the independent innovation effect,industrial agglomeration effect,global value chain embedding effect and intermediate goods import effect.(1)Independent innovation,global value chain embedding and import of intermediate goods play a stronger mediating role than industrial agglomeration.(2)After distinguishing the different investment motives of enterprises,the four mediating variables all have mediating effects in the process of technology-seeking OFDI improving export product quality.In the process of market-seeking OFDI improving export product quality,only industrial agglomeration and value chain embedding play a mediating effect.And in the process of resource-seeking OFDI affecting the quality improvement of export products,the four mediating variables have no mediating effect.(3)After distinguishing the life cycle of enterprises,in the growth stage of enterprises,independent innovation,global value chain embedding and the import of intermediate goods can exert an obvious mediating role.In the maturity stage of enterprises,independent innovation,industrial agglomeration and global value chain embedding have a mediating effect.In the decline stage of enterprises,only global value chain embedding plays a mediating role.And in the start-up stage of enterprises,none of the four mediating variables has a mediating effect.Accordingly,this paper puts forward the following constructive recommendations.For the government,it should guide OFDI companies to invest in capital-intensive and technologyintensive industries.Each province should carry out targeted OFDI activities according to local conditions.And it should guide firms to effectively avoid investment risks arising from the host country’s institutional environment and other factors.For enterprises,they should actively integrate into global innovation networks and seek "new impetus" for technological innovation.They need to enhance the agglomeration advantages of OFDI enterprises in their home countries and optimize the development direction of OFDI.What’s more,they should actively embed themselves at the high-end of the global value chain,broaden access to technology,and moderately increase the import of high-quality intermediate goods.And the global layout of intermediate goods procurement is optimized through OFDI.