The Driving Factors Of The Outward Direct Investment Of The Chinese POEs: Mechanism And Evidence

The driving factors of Chinese private owned enterprises' outward direct investment(ODI for short)are important issues in the area of Chinese enterprises' going-out.However,the driving factors in home country were understated comparatively.The typical four mentioned by extant research are economies of scale,industrial agglomeration,segmentation of goods market and distortion of credit market.It is worth noting that extant research about the four have two gaps at least.The first one is that they are scattered and are rarely characterized with a unified framework.The other one is that most of them are empirical research but without theoretical analysis,especially lack of the mechanism analysis.This thesis aims to characterize the four with one unified framework,analyze the causal relationship theoratically and empirically.In the section of theoretical modelling,Chinese POEs' participation of ODI follow the logic of maximizing earned profits.Thus,the theoratical analysis of the four were integrated under the basic logic or in other words to clarify the interaction between the exogeneous change of the four and the profit-maximizing decision.Basing on the “heterogeneous firms”framework provided by Melitz and Ottaviano(2008),a model with two countries was constructed.In the models,firms in home country could choose either marketseeking or technology-seeking ODI into host country besides exportation.In the former case,firms face the trade-off between the fixed cost of ODI and the variable cost of exportation.In the latter,firms could enhance the productivity of headquarter in home country besides accessing the foreign market.Based on the settings above,the analytical solution of the average ODI probability in home country could be calculated.Comparative static analysis was implementd in the state of equilibrium.The basic conclusions are as follows: 1)Home market size will facilitate ODI of two types through the mechanism of “firm scale expansion effects” and “competition promotion effects”;2)The diversity of home industrial agglomeration will promote ODI of two types through the mechanism of “division of labour effect”;3)Segmentation of home goods market will hinder ODI of two types through the “competition-hindrance effect”;4)Dsitortion of home credit market will hinder ODI of two types through the “competition-hindrance effect” and“financial constraints enhancing effect”.In the section of empirical research,the data of Chinese above scale manufacturing POEs from year 2004 to 2013(except year 2010)was used as sample to examine those propositions.The procedures are as follows:Firstly,based on the firm-level information put on record,search for key words to clarify the purpose of ODI and regress with the economic characteristics of hose country to avoid the systematic error of the sorting.Secondly,using the proxy variables widely accepted by acadamia to execute benchmark regression.Thirdly,instrumental variables and quasi-experiment were conducted to clarify the causal relationship between independent and dependent variables,robust check was executed by lagging core independent variables and eliminating rare-event error.Finally,mechanism test and heterogeneous analysis were conducted.Besides,the four driving factors were regressed together to make sure the explanatory power of the individual.The main findings are as follows: 1)Home market size and firm size could promote POEs' ODI of two types,the exogeneous expansion of home market will work through the mechanism of “firm scale expansion effects” and “competition promotion effects”;2)The diversity of agglomeration will promote POEs' ODI of two types,the mechanism is releasing financial constraints through division network.3)Segmentation of goods market will hinder POEs' ODI of two types,the mechanism is “competitive barriers effects”.4)Distorttion of credit market will hinder POEs' ODI of two types,the mechanism is“competitive barriers effects” and “financial constraints promotion effects”.Then the inferences above were generalized into 8 propositions.The probable marginal contributions are as follows: Firstly,in the section of theoretical modelling,this thesis organisized the four driving factors into one unified framework and tried to fill the gaps of extant research in terms of the logic and mechanism describing,including constructing the micro mechanism and clarifying the effects of “economies of scale” theory,segmentation of goods market and distortion of credit market.Meanwhile,implementing financial constraints as an intermediator,the two ideas were connectd in which industrial agglomeration affects POEs' ODI through alleviating financial constraints.Besides,POEs' ODI of two types were taken into account to be close to reality.Secondly,in the aspect of theoretical modelling,based on extended MO model,the mechanism through which the four driving factors affect POEs' ODI of two types was constructed.This strategy overcomed the shortcoming of extant research.On the one hand,overcomed the limitation of HMY model that taking only market-seeking ODI into account.On the other hand,overcomed the limitation of SB model that supposing all firms are heterogeneous.Thirdly,instrumental variables and quasi-experiment were used to clarify the casual relationship and to ensure the robustness of our main results.Finally,in the section of conclusions and policy implications,the thesis revealed that “economies of scale”and diversity of industrial agglomeration played an important role in Chinese POEs' ODI.However,segmentation of goods market and distortion of credit market will hinder Chinese POEs' ODI.Thus an opposition was proposed to extant “ institution escapism view”.The implication of this thesis is that comprehensively deepening market-oriented reforms,breaking down policy barriers or institutional distortion in goods and credit market may be the long-term consideration for promoting Chinese POEs' going-out.