The internationalisation of Chinese firms: Impact of FDI experience on export performance

Abstract

This study investigates the relationship between firms’ export performance and prior investment experience in the corresponding country by using a novel dataset of Chinese firms. We find that a firm's export performance, in terms of value, quantity, unit price level and product varieties, is considerably better in destination countries where the firm has previously invested. The patterns are more pronounced when exporters are non-state-controlled or small-sized firms. Our analysis also shows that such country-specific outward foreign direct investment experience can facilitate firm exports by bridging country-pair physical and cultural distances and overcoming contractual barriers in destination countries. The data further imply that the positive effect partly stems from the purpose of local production.