AITC
Description
This paper provides a theoretical analysis and an empirical examination of how the integration of artificial intelligence and industrial technology affects outward foreign direct investment by firms. By constructing a production function and a profit function model for outward-investing firms, it demonstrates the effect of the integration of artificial intelligence and industrial technology on outward foreign direct investment as well as the mechanisms underlying this effect. Using a sample of Chinese A-share listed firms from 2001 to 2024, the paper then empirically tests this effect and its mechanisms. The results show that the integration of artificial intelligence and industrial technology has a positive effect on the scale, probability, and frequency of firms' outward foreign direct investment, and this conclusion remains robust to a series of checks. The integration of artificial intelligence and industrial technology promotes outward foreign direct investment by strengthening collaborative innovation and enhancing productivity. Moreover, the positive effect is larger for firms with a stronger willingness to undergo digital transformation of their business, whereas it is relatively smaller for industries with a better digital foundation and for regions participating in the supply chain digitalization pilot program.