Spillover effects of government subsidies on outward foreign direct investment: Evidence from China

We examine the effect of government subsidies on outward foreign direct investment (OFDI) by Chinese listed firms. Based on a panel dataset covering Chinese listed firms from 2009 to 2021, our findings indicate that government subsidies can promote OFDI by enhancing the production efficiency, innovation capability, and social performance of Chinese listed firms. Furthermore, the heterogeneous analyses show that non-tax-based subsidies significantly promote OFDI by Chinese listed firms, and government subsidies do not result in a discernible preference for greenfield investments or mergers and acquisitions. In addition, government subsidies can significantly contribute to promoting OFDI for non-SOEs, older firms, firms in globally emerging sectors and domestically catching-up sectors, as well as firms located in eastern China.