Production-Oriented OFDI’s Effect On Domestic Firms

In recent years,the rise of C hina’s production-oriented OFDI follows the provisio ns of the “Going Out” strategy.With the transformation of the domestic economy and domestic manufacturing capacity surplus,more and more companies begin to invest abroad and build factories in foreign.On the one hand,investing aboard can avoid the excessive competition of domestic,on the other hand,cheaper human costs in foreign such as some countries in Africa can benefit us to save cost.The production-oriented OFDI how to effect the productivity,export,the scale of production and employment of parent company? Does the theme of the “Industry hollow” which has been caused by the reduce employees and scale of parent company really existence ? In this paper,we analyzed the production-oriented OFDI’s effect on domestic firms using firm-level data from C hinese industrial enterprises in the period of 2000 to 2011.We will separately analysis the problem from productivity,the scale of production,exports,and employment.Combine with the method of propensity score matching(PSM)and difference in difference estimator(DID),we find that the productivity,the scale of production,the export and the employment of parent firms’ have all significantly improved no matter which data sample we use.In general,the production-oriented OFDI has a positive effect on parent company.And will not lead to further "industrial hollowing out" which caused by the reduce employees and narrow scale of parent company.Thus,the C hinese government should further open to the outside world and encourage the kind of Chinese enterprises to go out.