OFDI and firms' sustainable productive capacity: Evidence from Chinese industrial firms

Using data on industrial firms from 1999 to 2007, this paper explores the relationship between the outward foreign direct investment (OFDI) and sustainable productive capacity of Chinese firms. The paper finds that, first, industrial firms’ engagement in OFDI has a significant impact on their sustainable productive capacity. Second, OFDI has a more pronounced effect on sustainable productive capacity for firms with developed countries as their investment destination countries, firms with single branches, and overseas trade sales-oriented firms. Finally, human capital, R&D intensity, and technology gap have significant mediating effects on the relationship between OFDI and sustainable productive capacity. Therefore, in order to better exploit the role of corporate OFDI in boosting sustainable productive capacity, China should expand its space for foreign cooperation among domestic firms, improve the talent cultivation mechanism, and capitalize on the international competitive advantages of multinational enterprises.