Learning by outward FDI: Evidence from Chinese manufacturing enterprises

Abstract

Using firm-level data of Chinese manufacturing enterprises between 1998 and 2007, we investigate the existence and channels of “learning by outward FDI”. Difference-in-differences estimation reveals that productivity of Chinese parent firms is significantly improved by their outward foreign direct investment and the learning effects form a “V” shape in the following years. There is no significant difference in learning effects between state-owned enterprises and non-state-owned enterprises; neither do we find any evidence that investing in countries with advanced technology gives more learning effects. In addition, we find that learning effects mainly come from technology transfer, technology spillovers and an enlarged production scale.

Keywords

• outward foreign direct investment
• learning effects
• learning channels
• difference-in-difference estimator