Digitalization and outward foreign direct investment of Chinese listed firms

Abstract Digital transformation has given firms new development capability. This paper portrays the overall digital transformation intensity of China's listed firms in 2007–20, and empirically examines the impact of digital transformation on outward foreign direct investment (OFDI) and its transmission mechanisms for the first time. It is found that digital transformation significantly enhances OFDI with two transmission mechanisms: (1) reduced transaction costs and (2) improved production and operation efficiency [Correction added on 25 Aug 2023, after first online publication: The number of transmission mechanisms have been corrected from ‘three’ to ‘two’ in this version.] The impact is more pronounced in the host countries whose economies are more digitalized, in private enterprises, and in the service industries than in their respective counterparts.