Learning By Outward FDI

China’s outward foreign direct investment has ushered in a stage of rapid development, The rapid growth of outward foreign direct investment will affect the home economy by many ways. The change of parent companies’ productivity is the most direct impact. We regard this effect as learning effect, which is refers to accelerating the absorption and creation of technical knowledge and other non-technical information, so as to promote the enterprise productivity. Using firm-level data for Chinese manufacturing enterprises between 1998 and 2007,we investigate the existence, characteristics and channels of "learning by outward FDI ".Difference-in-differences estimation reveals that multinational enterprises’ productivity are significantly improved by their investing outward and the learning effects forming an “V” shape in following years. The technology gap would influence the effect. But there is no significant difference between state-owned enterprises and non-state-owned enterprises on learning effect. At the same time, the learning effect mainly comes from multinational enterprises’ the expenditure of R&D and staff training, and their production increasing.Based on the researching result, enterprises should make the appropriate investment strategy layout, according to investment purposes, characteristics of themselves and the host country. Parent enterprises should pay more attention to R&D and human capital investment to strengthen the absorption and conversion of knowledge spillovers.