The Influence Of Factor Market Distortion On Chinese Firm Outward Foreign Direct Investment

In recent years,China's Outward Foreign Direct Investment(OFDI)has continued to develop rapidly.In particular,in 2014,China's OFDI exceeded FDI for the first time,marking China's “going out” stepping into a new stage of development.The transition from capital importing countries to capital exporting countries marked China's “going out”into a new stage of development.According to Dunning's Investment Development Path(IDP)theory,a country's level of economic development affects the country's international investment behavior.Specifically,when the country's per capita GNP reaches a certain value,The country's FDI and OFDI maintain the same development direction as per capita GDP.In recent years,the rapid growth of China's outward foreign direct investment is in line with Deng Ning's investment development cycle theory,and it is inevitable that it looks like a product of GDP growth.However,China is currently in a period of economic transformation.The rapid growth of OFDI is achieved in a specific economic context.We need to be aware of the possible problems of OFDI in this particular context.Factor market distortion is a typical representative of China's specific economic background.Under the distortion of factor market,the market no longer relies solely on the productivity of enterprises to achieve the distribution of production factors,resulting in a series of development problems such as excessive use of factors and low production technology.It will have an impact on outward foreign direct investment and its sustainability.Outward foreign direct investment is one of the ways for enterprises to operate internationally.At present,the impact of factor market distortion on the international operation of enterprises is mainly concentrated on exports.There is little literature to examine its impact on outward foreign direct investment.Based on the above analysis,this paper integrates the factor market distortion and the enterprise's foreign direct investment into the same research framework.Through the combing of related literatures and related theories at home and abroad,the influence mechanism of the two is summarized as the factor price underestimation effect and the ownership difference effect.The matching enterprise layer verifies the relationship between the two.The main research conclusions are as follows:(1)From the overall perspective,the factor market distortion has a positive impact on the enterprise OFDI,that is,the factor market distortion promotes OFDI;(2)from the perspective of heterogeneity,Factor market distortions help non-state-owned enterprises and high-productivity enterprises to invest in countries with high governance levels;(3)From the further analysis,the factor market distortion significantly shortens the preparation time and duration of the company's outward foreign direct investment,which indicates that the factor market distortion is promoting the enterprise's outward foreign direct investment,while the enterprise driven by it may not have strong foreign “survival” ability.Therefore,in the current economic background,China should continue to promote the process of factor marketization and provide assistance for enterprises to better outward foreign direct investment.