Does digitalization boost companies' outward foreign direct investment?

Area of Science:

• Economics
• Business Strategy
• Digital Transformation

Background:

• The digital economy's rise impacts corporate strategy, production efficiency, and business models.
• The effect of corporate digitalization on outward foreign direct investment (OFDI) remains under-researched.
• Understanding digitalization's role in OFDI is crucial for global business strategy.

Purpose of the Study:

• To empirically investigate the impact of corporate digitalization on OFDI.
• To identify the mechanisms through which digitalization influences OFDI.
• To analyze the role of digital economy policies and heterogeneity in this relationship.

Main Methods:

• Utilized text analysis to construct corporate digitalization indicators.
• Employed empirical testing on a sample of Chinese listed companies (2009-2020).
• Examined the mediating roles of total factor productivity and financing constraints.

Main Results:

• Digitalization significantly promotes corporate OFDI.
• Digitalization enhances OFDI by improving total factor productivity and reducing financing constraints.
• Digital economy policies and firm-specific factors (resource efficiency, market environment) influence the digitalization-OFDI nexus.

Conclusions:

• Digitalization is a key driver of corporate OFDI.
• Improving total factor productivity and alleviating financing constraints are crucial pathways for digitalization-driven OFDI.
• Policy support and consideration of heterogeneity are vital for leveraging digitalization in international business expansion.