Going Global and Production Capacity Utilization of Enterprises

This paper uses the data of China’s listed companies from 2010 to 2018 and employs difference-in-differences to investigate the impact of “going global” on the capacity utilization rate of enterprises. We deem the “Belt & Road” initiative a quasi-natural experiment and carry out baseline estimation and robustness checks. The results show that participating the “Belt & Road” construction has significantly increased the capacity utilization rate of enterprises. Outward direct investment and overseas project construction are both effective ways. Extended analyses show that the effect of the “Belt & Road” initiative in increasing the utilization rate of enterprise capacity is more prominent among state-owned enterprises, high-productivity enterprises, low-capital-intensive enterprises and non-export enterprises. Based on the empirical findings, the paper further analyzes the transmission mechanism through theoretical modeling, which shows that the “Belt and Road” initiative has improved the capacity utilization rate of enterprises by reducing adjustment costs, alleviating information asymmetry, and weakening the government’s preference for scale.