Green Industrial Policy and OFDI Performance: Evidence from Green Factory Certification

Against the backdrop of the global green transition and China’s pursuit of high-quality opening-up, examining whether green industrial policy can improve firms’ OFDI performance is important for understanding how domestic green transformation can be translated into international competitive advantages. Firms’ OFDI performance is not only related to the long term returns of firms’ cross border operations, but also reflects the effectiveness of a country’s opening up strategy. Using Chinese A share listed manufacturing firms from 2010 to 2024 as the research sample, this study constructs a multi period difference in differences model to systematically examine the impact of Green Factory certification on firms’ OFDI performance. The results show that Green Factory certification significantly improves firms’ OFDI performance. This conclusion remains robust after a series of tests, including the parallel trend test, heterogeneous treatment effect identification, and instrumental variable estimation. Further mechanism analysis indicates that Green Factory certification promotes the improvement of OFDI performance mainly through two channels, namely enhancing total factor productivity and strengthening the green innovation-driven effect. The moderating effect results show that overseas investment experience strengthens the positive effect of Green Factory certification on OFDI performance. The heterogeneity analysis further suggests that the performance-enhancing effect is more evident among firms adopting wholly owned entry modes, firms operating in heavily polluting industries, non-state-owned firms, and firms investing in host countries with higher environmental performance. This study contributes to the literature on environmental regulation, green innovation, and international business by showing that Green Factory certification functions not only as a green industrial policy tool, but also as both an institutional signal and a capability-building mechanism, helping to convert firms’ green transformation capabilities into international performance advantages.