Does the Belt and Road Initiative Reduce the R&D Investment of OFDI Enterprises? Evidence from China's A-Share Listed Companies

Existing studies on the Belt and Road Initiative (BRI) primarily explain its impact on foreign trade, foreign direct investment and economic development of the countries concerned, whereas its impact on the performance of outward foreign direct investment (OFDI) enterprises has rarely been examined. By considering the BRI as exogenous policy shock, this paper analyzes the mechanism and impact of the BRI on the research and development (R&D) investment of China's OFDI enterprises investing in countries along the Belt and Road. With propensity score matching and a difference-in-difference approach, it tackles the endogeneity problem caused by self-selecting into the BRI enterprise group. The estimates indicate that BRI has not effectively promoted the R&D investment of OFDI enterprises, but plays an inhibitory role in the short term, and the marginal effect increases firstly and then decreases. Further mechanism analysis shows that the BRI leads to the addition of overseas revenue and the reduction of return on assets, which are the main reasons for the decrease of the R&D investment. In addition, the ownership heterogeneity analysis finds a higher negative effect on the state-owned enterprises, while a smaller effect on non-state-owned enterprises.