When Responsibility Compensates for Ownership: Agency Theory, State Capitalism, and the Scale of Chinese OFDI

This paper investigates how the ownership structures of Chinese enterprises shape their outward foreign direct investment (OFDI) outcomes, and whether corporate social responsibility (CSR) performance alters that relationship. Drawing on agency theory and a firm-level panel dataset of companies listed on China’s Shenzhen and Shanghai Stock Exchanges covering 2008 to 2017, the study asks two related questions: does state ownership systematically disadvantage firms in international investment relative to their privately held counterparts, and does CSR performance function as a moderating force capable of offsetting whatever ownership-driven effects emerge? The empirical analysis indicates that state-owned enterprises (SOEs) tend to underperform private firms in OFDI, yet reveals that the degree of government intervention, whether a firm is controlled by the central government or by a provincial or municipal authority, does not itself produce a statistically distinguishable difference in OFDI outcomes within the SOE category. Crucially, the study finds that stronger CSR performance can partially offset the OFDI disadvantage associated with state ownership, but this moderating effect is not uniform across all SOEs: it operates specifically among locally governed SOEs, whose primary obstacle in foreign markets is a reputational deficit rather than the institutional pressure and risk aversion that constrain centrally governed counterparts.