This article takes the proposal of the Belt and Road Initiative (BRI) in 2013 as a quasinatural experiment, uses the difference-in-difference model and data on China's listed companies from 2010 to 2021 to examine the relationship between outward foreign direct investment (OFDI) and total factor productivity in the micro level. The empirical results show that after the BRI is put forward, enterprise investments in countries along the Belt and Road have a reverse ‘productivity effect’ at first, with the implication of being the strongest in 2015 but are no longer significant by 2017; furthermore, the BRI has a significant positive effect on the total factor productivity of enterprises in 2021. Potential irrational investments and low investment efficiency can better explain this phenomenon, as investment efficiency declined at the beginning of the BRI but steadily increased after 2019, which is consistent with the negative to positive ‘productivity effect’. Extended analysis and robustness tests support the above conclusions.
Policy Implications
- The focus of the BRI has changed from ‘overall layout’ to ‘paying attention to details’, and this trend helps to alleviate the negative impact of enterprises' OFDI on TFP.
- Enterprises should enhance international operation experience and recognise risks in countries along the Belt and Road.
- Key industries usually can receive more policy support, and the financing constraints are relatively lower, easily leading to ‘overconfidence’ and ‘irrational’ investments.
- To avoid distorting normal market, policy makers should create a fair market competition atmosphere for enterprises, reduce information asymmetry and decrease investment barriers.