The motivation and impact of outward foreign direct investment in China

Pun, Chi Chung and Ingham, Hilary and Read, Robert (2020) The motivation and impact of outward foreign direct investment in China. PhD thesis, Lancaster University.

Text (2020chichungpunphd)
2020chichungpunphd.pdf - Published Version
Download (3MB)

Abstract

The Chinese government believed that encouraging the country’s enterprises to invest overseas would strengthen the competitiveness of domestic firms, which would, in turn, promote Chinese economic growth. However, according to theory, the Chinese firms investing overseas would require certain firm-specific advantages which they would use as leverage during the internationalisation process. Herein lies the problem, Chinese enterprises have been often perceived as lacking specific strengths. This thesis includes three empirical studies, which aim to explore the latest developments of Chinese outward foreign direct investment by investigating how Chinese enterprises acquire crucial firm-specific advantages and understand the consequence towards the local economy. The first contribution of this study focuses on Chinese investments in 34 OECD countries, with the aim of identifying the key determinants of outward investment. The work details an examination of the validity of a wide range of factors believed to underpin the motivation driving foreign direct investment. The second empirical study aims to understand the motivations of investing into Hong Kong SAR by conducting a firm level study through a survey and interviews. The results indicate the Chinese enterprises expect to add value by investing in Hong Kong SAR, where a platform is provided for equipping firm-specific advantages that may speed up the progress of internationalisation. The third empirical study evaluates the impact of Chinese outward foreign direct investment on the home economy from productivity perspectives. The findings on productivity indicate a positive impact of outward foreign direct investment on total productivity factors and provide evidence to indicate success in the catching up effect in China. The results obtained by studying the motivations of Chinese overseas investments and the impact of the investments on the local economy may encourage further studies in the area. More importantly, the significant findings have important managerial and government policy implications.