Productivity,Financing Constraints And Foreign Direct Investment Options

Foreign direct investment is an important means of internationalization of firms and an important part of the global economy.The foreign direct investment of Chinese firms began at the end of the 20th century,and continued to develop with the continuous deepening of China's "going out" strategy and the continuous strengthening of China's economic strength.Since 2015,China's direct investment in other countries has exceeded the amount of foreign investment,China has become a net capital outflow.However,due to the late start of China's foreign direct investment,despite China's large growth rate,there is still a big gap with the US in terms of stocks.Along with the accelerating process of China's internationalization and the implementation of the "One Belt,One Road" strategy,combined with the development experiences of countries towards internationalization,it is believed that Chinese firms' foreign direct investment still has great growth prospects.Under this trend,more and more Chinese companies are actively considering foreign direct investment.These firms need to make a series of decisions in the process of making foreign direct investment.How to choose between cross-border M&A and greenfield investment is one of the most important issues faced by the firms.Since China's foreign direct investment has a limited experience,it is an urgent need of relevant research in order to support the investment decision of the firm.Therefore,it is of great practical significance to study the factors that influence the Chinese foreign direct investment options.Most of the research on the foreign direct investment options is based on the traditional international economic theory.In recent years,with the development of heterogeneous firm trade theory,some domestic and foreign scholars have begun to use the heterogeneity model to analyze the influencing factors of foreign direct investment options.However,these studies generally only consider the role of corporate productivity in foreign direct investment decisions,ignoring financing constraints,which have important implications for Chinese companies.Based on a large amount of reading related literature and analysis of foreign direct investment of Chinese firms,this paper breaks through the traditional foreign direct investment theory,introduces the financing constraint index into the heterogeneity model of firms,and analyzes the influencing factors of corporate foreign direct investment options.Subsequently,by using the Logistic regression model to analyze Chinese listed companies that chose OFDI between 2004 and 2015,the hypothesis proposed in this paper was empirically tested.The results show that companies with small productivity,small financing constraints and large scale tend to choose cross-border mergers and acquisitions,in order to turn firms' capital advantages into productivity advantages;and the restrictions imposed by the host country have forced state-owned firm to choose greenfield model.According to the conclusions of theoretical and empirical research,this paper proposes countermeasures.Firms which choose foreign direct investment must have a clear internationalization framework and strategic planning.When firms considering foreign direct investment,they must comprehensively consider the firm's own situation and development needs,and reasonably analyze the costs and benefits of various foreign direct investment methods.The government should continue to deepen market-oriented reforms and reform of state-owned firm ownership,and establish a fair and reasonable business environment.Actively expand the financing channels of firms,ease the financing pressure of firms.Replace traditional economic incentives with tax reductions,and maintain the policy sustainability and stability.Only in this way can Chinese firms' foreign direct investment be able to grow healthily and sustainably.