The Heterogeneity Of Chinese Industry Firms Investing Overseas And The Effect On Economic Development And The Structure Of Industry In Home Country

The global FDI was decreased by 17% in 2012. While in the same year the FDI out from China was increased by 17.6%. The liquid of FDI from China is 87.8 billon dollars and the stock is 531.9 billion dollars. At present China is the third largest country in OFDI. Meanwhile China has 16 thousand firms which set up 22 thousand subsidiaries in other counties. These subsidiaries distribute 179 countries in the world and cover 76.8% of all countries. Under this circumstance the paper wants to investigate three issues. Firstly, what factors contribute to Chinese firms investing outside? Secondly, what effect on Chinese economy and industry structure by large firms investing other country? Thirdly, what risks the firm maybe meet and how to deal with firm death? To answer above questions is not only the researcher need to deal with, but also our country and companies must to attention when they constitute policies for “walking out”. So this paper focuses on above questions. Firstly the paper explains the issues in theory and provides some hypothesizes under the characteristic of Chinese firms. Then the paper empiric above theories and hypothesizes by the data of Chinese industry firms.What factors contribute to the decision of “walk out” about Chinese firms? It is the high productivity and the market competition or some other factors. This paper explains the issues basing on the model of Helpmam et al.(2004). Then we use the data of Chinese industry firms to find the empirical evidence. Through empirical studying we find that excepting according to the traditional expectation also there are other characteristics. Firstly, if the firms invest in the country of high income, their productivity is not the highest. Secondly, the firms which have the motive of learning technology have the highest productivity. Thirdly, the state-owned enterprises who invest other country always have the low productivity. At last, if firms invest in the country of low income, the firms which invest more countries do not mean high productivity. The paper also finds the relationship between host country and investing firms. For example, increasing the market scale of host country extend the extensive margin of firms and depress the threshold of productivity. But if the cost of fixed investment increases it will promote the threshold and short the extensive margin.While what effect on the economy and the structure of industry in home country when large scale firms invest other country. This is an important issue. The paper intends to investigate the effect on economy and industry structure when Chinese firms invest other country. Firstly, what are effect on the productivity and competitive after the firms invest other country. Secondly, what are the effect on export、employment、fixed investment and scale of firms after the firms walk out. China is a developing country. It has not too much competitive advantages comparing other developed country. So we must use the resource of developed countries to contribute to effective and structure changing of our country. This is an important mission in the stage of new time. So under the circumstance of large firms “walk out” the paper investigating the topic is worthy.Basing on above frame this paper investigates the topic from two aspects. Firstly, it intends to explore the relationship between going out of Chinese firms and the upgrading of productivity. Such as productivity、new products and R&D. Secondly, it wants to study the effect on firms itself after investing other country. For example export、employment、fixed investment and increasing of scale. After explaining the mechanism in theory and giving the hypothesis the paper go to get the empirical evidence in the data of Chinese firms.There are several results about productivity. Firstly, productivity of the firms is increased after investing outside. But the effect of productivity is descended. The effect is small when the firms invest for technology and natural resource. Secondly, the effect of productivity is affected by different country. For example the developing country is more. But the Hong Kong and tax haven is litter. Thirdly, the state owned enterprises have not apparent effect in productivity. While there are also results about new products and R&D. Firstly, the new products and R&D is increased after the firms investing outside. Secondly, no matter developing country but also developed country all advance the new products and R&D. Thirdly, the effect is a “U”. Such as first descend and then increase. Fourth, the effect is most when the firms go to learn some technology. But if it wants to get natural resource the effect is litter. The effect of R&D is decreasing large in different motives. For example the service and business is low and the learning of technology is large. Finally, the state owned enterprises have not much effect of new products and R&D.There are several results about their export when the firms investing outside. Firstly, their export is increased by investing in other country. But the effect of export is invert “U”. Secondly, the income of host country decides the effect of export. The export is increased when the firms invested in country of high income. But the export is not positive when the firms invested in country of low-income and tax-haven. Thirdly, the motive of service and business increase the export. But other motive did not. Finally, investing outside increases the intensive margin, but also expands the extensive margin. While there are also results about employment、scale and fix investment of the firms. Firstly, they are increased after the firms investing other country. Secondly, the effect is an invert “U”. Thirdly, the motive of business and service increases the effect. But other motive does not. Fourthly, investing in the country of high income enlarge the effect. Fifthly, Chinese firms which invest in the developing countries do not decrease their performance in home country. Finally, the state owned enterprise does not get the effect.The risks and death in outside is also an important issues when scale firms invest outside. Due to the difference of institution and culture the firms may meet some extra risks. Besides it is the key to success by dealing with the risks. Due to the extra risks they also may add probability of death in outside. So this paper also wants to investigate the risks of institution and culture. And then go on explore the relationship between risks and death of firms. Definitely, the paper explains the theory and gives the hypothesis. After that we give the empirical evidence in data of Chinese firms.There are several results about the different institution. Firstly, the risks of institution are decided by the income of host country. If the host country is high income the stability of politics descend the risk. If the country is low income the stability of politics、effective of government、rule of law and control of corruption descend the risk. Secondly, the risk which is created by difference of institution is decided by income of host country too. The difference in rule of law and control of corruption increase the risk. The difference in effective of government descends the risk. Finally, the moderate difference in institution is helpful to descend risk when the host country is a developing country.When Chinese firms invest in different culture there are also some risks. Firstly, the conservation and hierarchy in culture of host country increase the risks. The affective autonomy and egalitarian is helpful to descend the risks. Secondly, the moderate difference in culture can decrease risks. But when the difference is too large it will increase the risks. There are also some results about the death of firms in outside. Firstly, when the firms invest outside it will descend the probability of death. Secondly, no matter the motive and the income of host country all descend the probability of death. The mechanism is that the competitive power is increased by investing outside. So it may decrease the probability of death. After all the competitive ability offset the risks which are created by investing outside.Under the circumstance of scales Chinese firms “walk out” this paper mainly investigate three issues. Firstly, what factor decides the firms investing other country? Secondly, what are the effects on Chinese economy and structure of industry by the firms investing outside? Thirdly, the risk and death of firms is created by the difference in culture and institution. Above issues are need to deal with in theory. So to answer these questions not only are help for our government but also can make Chinese firms better to walk out.