Firm’s Multiple Heterogeneity And Chinese Strategic Asset Seeking OFDI’s Self-selections

About International Direct Investment, economists have established theoretical frameworks to study why and how enterprises conduct FDI, however, Mutinaltional Companies(MNCs) in developing countries provide an unique background for FDI theories to refine, extend and conduct empirical tests. Compared with traditional MNCs, due to the low level of economic development and the existence of loopholes in the system, etc., MNCs in developing countries have different investment motivation, competitive strategy and risk bearing capacity in the process of internationalization. Developing countries’ OFDI "reflects the tendency of seeking technology, management and strategic skills that domestic enterprises lack of, namely strategic asset seeking OFDI. With global FDI liberalization, a large number of Chinese enterprises swarm into international market through OFDI to seek strategic assets. In the international market competition, some enterprises have become more and more powerful and established their own ownership advantage, while some enterprises are difficult to survive until out of the market. Differences of operating performance between Chinese OFDI enterprises embody the main points of firm heterogeneity FDI theories, that is, firm heterogeneity is the main reason for self-selection and internationalization performance difference.This dissertation attempts to study the self-selection and investment performance of developing countries’ strategic asset seeking OFDI using the research framework of firm heterogeneity FDI theories. When firm heterogeneity FDI theories are placed in indeveloping countries, especially considering strategic asset seeking FDI, we must change the relevant assumptions, such as adding the hypothesis of reverse spillover. Accordingly, the relationship between FDI and productivity, effect of learning by FDI, relationship between FDI liberalization and welfare effects also need to be reconsidered. Under this circumstance, simple static model can not comprehensively interpretate the reality and need to integrate the dynamic firm heterogeneity in the model.The main conclusions of this dissertation are as follows:(1) This dissertation revises firm heterogeneity FDI model of Helpman et al. (2004), by introducing strategic asset seeking FDI and productivity drivers into the theoretical framework; on this basis this dissertation constructs a long-term equilibrium model containing endogenous dynamic mechanism and portraying firms’ self-selection. The dynamic self-selection process shows that firms will purposely improve their productivity, and make self-selection based on their own productivity heterogeneity, so as to guide the dynamic market change. Firms with the lowest productivity do not invest in productivity drivers and their productivity will gradually decline to zero, and eventually are driven out of the market. Firms with high productivity choose to enter international market and constantly invest in productivity drivers, so their productivity, profits and output continue to increase. Only the firms with highest productivity will choose strategic asset seeking FDI, because this kind of FDI need pay higher fixed costs and investment costs.(2) The L-P method is used to estimate the total factor productivity of Chinese manufacturing listed Corporation, the result shows that productivity heterogeneity and productivity paradox coexist. On one hand, firm heterogeneity can explain FDI activities even for developing countries such as China. On the other hand, there is FDI productivity paradox" and "strategic assets seeking FDI productivity paradox" in some industries. This dissertation introduces important reverse spillover effect of FDI into the theoretical model, then firms’production cost, profit, and cutoff productivity levels of internationalization will change. Suppose the reverse spillover effect of FDI and strategic asset seeking FDI is large enough, we can make some reasonable explanation to "FDI productivity paradox" and "strategic asset seeking FDI productivity paradox".(3) Using the panel data of Chinese manufacturing listed companies during 2005-2014, this paper studies Chinese strategic asset seeking OFDI’s self-selection based on firms’multiple heterogeneity. The result of ordered probit model analysis shows that, what influences Chinese strategic asset seeking OFDI’self-selection is multiple heterogeneity including productivity heterogeneity. Compared with non-OFDI and ordinary OFDI firms, Chinese strategic asset seeking OFDI firms are larger and mostly private enterprises, located in the coastal open cities with slower growth, have higher productivity, greater innovative ability and stronger long-term debt solvency, pay more attention to brand shaping. These multiple heterogeneity differs between regions and industries. The globle financial crisis in 2008 has brought about "game rules change" for China to seek strategic assets in developed countries. This dissertation introduces the dummy variable of financial crisis into regression and shows that there is "economic structural break" during the development of Chinese strategic asset seeking OFDI.(4) Using the data of Chinese 1844 manufacturing listed companies during 2005-2014, this dissertation finds "learning by OFDI" effect exist in China; compared with the base period, TFP of OFDI firms has increased significantly, especially strategic asset seeking OFDI’s "learning by OFDI" is more obvious than OFDI overall. In view of the fact that "learning by OFDI" effect model can not describe the impact of dynamic evolution of multiple heterogeneity on Chinese strategic asset seeking OFDI performance, this dissertation uses the panel data of Chinese 740 manufacturing listed OFDI companies during 2005-2014 to study the relationship between multiple heterogeneity and firm performance. The result shows that the impact of firms’ multiple heterogeneity on OFDI performance differs between various motivations; for strategic asset seeking OFDI, performance improvement is significant in those young firms with high productivity, light long-term debt burden, fast growth, and high employee compensation.The significance and innovation of this dissertation are as follows:(1) This dissertation revises and expands firm heterogeneity FDI theories from the aspect of developing countries, constructs the theoretical model of strategic asset seeking FDI. This theoretical model introduces strategic asset seeking FDI into classical firm heterogeneity FDI theory model of Helpman et al. (2004); uses the endogenous nonlinear evolution model of Orlando Gomes (2014) to change the static model dynamic, by this means this dissertation establishes long-term equilibrium model containing endogeneous life cycle and portraiting firms’ self-selection effect. This model can explain strategic asset seeking FDI’s self-selection based on productivity heterogeneity and the dynamic evolution by investing on productivity drivers, therefore theoretically make up for gaps in previous studies. At the same time, this dissertation also timely corrects the theoretical model according to the result of empirical test, by introducing reverse spillover effect to explain "strategic asset seeking FDI productivity paradox". (2) From dynamic perspective, this dissertation studies Chinese strategic asset seeking OFDI’s self-selection based on multiple heterogeneity. By reviewing the development process of Chinese OFDI, this dissertation points out that productivity heterogeneity is not all firm heterogeneity, Chinese strategic asset seeking OFDI’s self-selection is the result of multiple heterogeneity including productivity heterogeneity. Using the panel data of Chinese enterprises during 2005-2014, this dissertation explores Chinese strategic asset seeking OFDI’s self-selection based on multiple heterogeneity, and the differences between the regions and industries in China. In particular, using the dummy variable method, this dissertation finds that there is "economic structural change" in Chinese strategic asset seeking OFDI before and after the global financial crisis in 2008. (3) The theoretical model of strategic asset seeking FDI based on dynamic firm heterogeneity and relative empirical test results enrich cross study of firm heterogeneity FDI theories and strategic asset seeking FDI theories. Discussion on firms’ multiple heterogeneity helps uncover the internal organization "black box" of firms, and explore the effective ways to improve productivity and performance.