Outward FDI and profitability of emerging economy firms: Diversifying from home resource dependence in early stage internationalization

Lin Cui*, Ying Xu

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    62 Citations (Scopus)

    Abstract

    We investigate the effect of conducting FDI on the profitability of emerging economy firms in early stage internationalization. We argue that FDI can be an effective strategy to alleviate liabilities of emergingness, thus generating positive performance outcomes. We hypothesize that, contingent on factors altering motivation and capability of firms to diversify from home resource dependence, emerging economy firms can benefit from conducting FDI, resulting in a greater rate of intangible assets growth and enhanced profitability. Using panel data of Chinese firms prior to the global financial crisis, and through combining matching techniques with difference-in-difference analysis, we find empirical support for our arguments.

    Original languageEnglish
    Pages (from-to)372-386
    Number of pages15
    JournalJournal of World Business
    Volume54
    Issue number4
    DOIs
    Publication statusPublished - Jun 2019

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