The regional dynamics of inward–outward FDI: the interplay of productivity, spillover, and competition

Despite continuous scholarly interest in the effects of inward foreign direct investment (IFDI) on outward foreign direct investment (OFDI), IFDI-OFDI dynamics remain unclear. We argue and show, in the context of China, that IFDI increases human capital availability for firm populations within a given region, but decreases labor efficiency in these firms due to growing competition for talent. Both dynamics, however, drive outward foreign direct investment (OFDI) as firms seek to escape competitive constraints and exploit their growing talent management capabilities abroad. Our findings make important contributions to our understanding of IFDI–OFDI dynamics.