The Impact Of Labor Cost On The Model Of OFDI

Currently,with the fierce competition in the world economy,enterprises in various countries adopt various ways to promote their own development.On the one hand,enterprises form their competitive advantages through technological innovation,product upgrading,and expanding the market;On the other hand,we can reduce our operating costs,improve profit margins,and maximize profits through various ways.In the past few decades,China has always had the comparative advantage of labor costs.However,with the disappearance of the Lewis inflection point and the disappearance of the demographic dividend,China’s labor costs have also shown a trend of increasing year by year.In this context,some Chinese enterprises choose to invest in OFDI in host countries with comparative advantages in labor costs,thereby reducing their production costs.There are two modes of OFDI,and studying the impact of changes in labor costs on these two modes can help Chinese enterprises better "go global".In this paper,the OFDI and enterprise-level data of China A-share listed companies from 2011 to 2020 in the national Taian database are selected to match the local economic data published by the National Bureau of Statistics to construct panel data,with a total of 3254 samples.Through the fixedeffect panel logit model,the influence of labor costs on the foreign direct investment model is empirically investigated..Before conducting empirical research,first analyze the current situation of the two modes of labor cost and OFDI to understand their historical trends and current development status.On the basis of a certain understanding of the two variables,conduct empirical analysis,and use the instrumental variable method for endogenous testing,using the method of replacing explanatory variables and replacing regression models for robustness testing,Finally,heterogeneity analysis is conducted from both regional and industry perspectives.The results show that:(1)The increase in labor costs will lead to an increase in green space investment and cross-border mergers and acquisitions,and the increase in cross-border mergers and acquisitions is more obvious,indicating that its impact on cross-border mergers and acquisitions is greater;(2)Divided into eastern and central and western parts of China,for the eastern region,the rise of labor costs has a significant role in promoting cross-border mergers and acquisitions,but has no significant impact on greenfield investment;For the Midwest,labor costs have no significant impact on the choice of cross-border M&A or greenfield investment by companies in the region;(3)In terms of manufacturing,construction,information transmission,software and information technology services,the coefficient of labor cost in the green space investment model is greater than that of transnational mergers and acquisitions,that is,the effect of green space investment is more obvious;In the case of construction,as well as information transmission,software and information technology services,changes in labour costs have no significant impact on the choice of two OFDI models by firms in that sector.Based on theoretical and empirical analysis,this paper proposes the following recommendations: Enterprises should focus on improving the quality of employees and work efficiency,while improving their innovation level and ability to form their own competitive advantage;The government can take measures to assist in talent cultivation,reduce corporate financing difficulties,and promote coordinated regional development.