The Impact of the Outward and Inward FDI on Global Value Chains

Authors

  • Hang Su
  • Yao Fu College of International Economics and Trade, Dongbei University of Finance and Economics, Dalian, China

Abstract

What kind of trade agreements should a country choose? Regional trade agreements, multilateral trade agreements, or both? What's the role of a country's outward foreign direct investment (OFDI) and foreign direct investment (FDI) in its participation and position in global value chains (GVCs)? Is a country's research and development spending conducive to breaking the "low-end locking" of FDI? Based on the World Input-Output Tables (WIOTs) released in 2016, this paper computes the indicators of GVC participation and position and identifies the feature of the production division, providing a reference for promoting regional and multilateral trade agreements. This paper uses feasible generalized least squares (FGLS) and system generalized method of moments (SYS-GMM) to examine the impact of a country's outward and inward FDI on its GVC participation and position. The empirical results imply that a country's OFDI promotes its GVC participation and fosters its upgrading within industries in GVCs, while FDI inhibits the upgrading of GVCs, though it promotes a country's GVC participation. In addition, a country's research and development spending can be conducive to breaking the "low-end locking" effect of FDI.

Keywords: Outward Foreign Direct Investment, Inward Foreign Direct Investment, Global Value Chains, World Input-Output Tables, Feasible Generalized Least Squares

JEL Classifications: C33, F21

DOI: https://doi.org/10.32479/ijefi.11950

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Published

2021-11-17

How to Cite

Su, H., & Fu, Y. (2021). The Impact of the Outward and Inward FDI on Global Value Chains. International Journal of Economics and Financial Issues, 11(6), 1–8. Retrieved from https://econjournals.com/index.php/ijefi/article/view/11950

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