Abstract

This paper examines how Chinese firms acquire knowledge and experience in international markets by attracting returnees using an original firm level survey from Guangdong province. It finds that there is a strong and positive relation between a firm’s choice of hiring returnees and its propensity to embark in FDI. Moreover, it shows that not all returnees contribute equally to firms’ internationalization. It is mainly those individuals in the most strategic functions, such as management and sales to determine both the propensity and the level of overseas direct investment. Finally, it finds that the presence of returnees is particularly effective for less experienced firms since it can help reduce the time taken to build capabilities and provide direct access to the knowledge necessary to invest abroad.