How “Belt and Road” initiative implementation has influenced R&D outcomes of Chinese enterprises: asset‐exploitation or knowledge transfer?

As an Outward Foreign Direct Investment (OFDI) promotion policy which aims to transform and upgrade Chinese firms, the ‘Belt and Road’ (B&R) Initiative has been widely discussed with regard to its influence on R&D activities. Many studies have associated this topic with the relationship between OFDI and R&D activities, however, the difference between the OFDI promotion policy and the OFDI has been neglected, resulting in little understanding of the effects of B&R implementation on R&D activities related to established OFDIs. By analyzing how the implementation of B&R affects asset‐exploitation and knowledge transfer, this paper provides a new perspective to help understand if and how Chinese firms that have affiliates in B&R countries gain positive R&D outcomes from such a policy. This study examines a sample of Chinese‐listed manufacturing firms from 2013 to 2017. Propensity Score Matching is used to construct a counterfactual framework and control for confounding problems from new OFDI entries. Difference‐in‐Differences is used to infer the policy effect of B&R implementation on R&D outcome of Chinese firms that have affiliates in B&R countries. Results show a continuously positive effect on R&D outcomes mediated by the increase in R&D expenditure, along with a directly weak‐positive effect on R&D outcomes in the short‐run. The continuously positive effect may be viewed as a result of an improvement in asset‐exploitation, while the directly weak‐positive effect is more a result of an increase in knowledge transfer, leaving out technology transfer. Regarding differences among Chinese firms that invest in B&R countries with varying levels of economic development, this study also found no differences between firms that have B&R affiliates in developed versus developing countries. This finding implies that Chinese firms have experienced little or no increase in technology transfer through B&R implementation. Overall, these findings, to some extent, illustrate Chinese firms’ behavior patterns in R&D management related to established OFDIs in light of OFDI promotion policies and help policy makers assess and understand the effects of the B&R implementation more deeply.