Outward foreign direct investment productivity along the belt and road

Abstract The extant research provides inconsistent results regarding the effect of outward foreign direct investment (OFDI) on firm productivity. There is no research on the effect of OFDI in belt and road (B&R) countries on Chinese firm productivity. In this paper, the impact of B&R OFDI on Chinese firm productivity and its influencing mechanisms are investigated. The main findings of this research are as follows. First, B&R OFDI positively influences productivity by alleviating firms' financial constraints. Second, the presence of market‐driven and production‐driven subsidiaries in B&R countries exerts a favorable moderating impact on firm productivity. Finally, the productive influence of B&R OFDI is more pronounced for firms in eastern China and for those in the energy and transportation sectors, and it is particularly significant for nonstate‐owned enterprises. These findings have practical implications for governments engaged in the design of effective policies for the promotion of B&R OFDIs and for firms developing robust OFDI strategies along the Belt and Road to improve their levels of productivity.