Firm Productivity And Outward FDI

China's outward foreign direct investment(OFDI)has witnessed a remarkable development since the implementation of “Go globally” and “The Belt and Road” strategy in the recent two decades.In 2017,the flow and stock of China's OFDI respectively accounted for 11.9% and 5.9% associated with the worldwide ranking in third place and second place according to UNCTAD,World Investment Report 2018.Today,China is not only one of the most thriving and attractive destinations for foreign investors but also one of the main capitalexporters.Recent years have seen an increasing body of research shedding light on this topic in terms of firm heterogeneity counting on the firm-level data,through which we can dive deeper into the analysis on the motivation,characteristics of OFDI firms and the impacts of OFDI on firms' productivity markup,growth,and performance.Based on the HYM model(Helpman et al.,2004)and the dataset by merging the Chinese manufacture firms' dataset and the “List of Foreign Investment Enterprises(Organizations)”,this paper mainly attempts to address the following issues pertaining to firm heterogeneity:(1)Compared with non-OFDI firms,what are the characteristics of the OFDI firms;(2)What are the impacts of productivity on firms' OFDI decision and to what extent can HYM model explain Chinese' firms' OFDI behavior;(3)Is there significant productivity disparity between firms tending to invest in high-income countries and those being apt to invest in low-middle income countries.(4)What is the impact of OFDI on Chinese firms' productivity growth?Firstly,by comparing OFDI firms and non-OFDI firms,the results indicate that the former indeed have a measure of advantages in terms of productivity,firm size,industrial output,and capital intensity;Secondly,by utilizing the logit model,we find that the more productive,the more likely firms are to invest abroad,which is consistent with the expectation of HYM model;Thirdly,after adding the income level of host countries,the results suggest there is no significant productivity difference between firms being apt to go for high-income countries and those investing in low-middle income countries.Fourth,to tackle the “selfselection” bias and endogeneity,we adopt the propensity score matching(PSM)method to select an appropriate sample,then use the difference-in-difference(DID)approach to conduct the empirical tests.The results turn out that OFDI has a significant and positive effect on firms' productivity mark-up,even for state-owned enterprises;In addition,this OFDI-led productivity effect on firms investing in high-income countries is lightly greater than those investing in the inferior ones.