Production Automation,Human Capital Mismatch,and Firm Performance
Since the"Belt and Road"Initiative(BRI)was proposed,thescale of Chinese overseas investment has significantly increased.Simultaneously,the doubts about the BRI have never disappeared,which seriously affect the firm performance and international image of foreign investment enterprises of China.Since local human capital levels are limited and large-scale hiring of foreign employees is ineffective,these enterprises investing in BRI countries choose more advanced technologies,such as automation and digitalization.However,restricted by the level of human capital in the host country and the"foreigners"role of Chinese enterprises,the impact of production automation on the performance of Chinese enterprises investment remains uncertain in BRI countries.Consequently,it is theoretically and practically important to analyze the relationship between production automation and firm performance of these enterprises.This study uses Chinese enterprises in South Asia and Southeast Asia as samples to explore the impact and mechanism of production automation on their performance.The study shows that,production automation significantly reduces firm performance.Human capital mismatch is an important factor to explain why enterprise production automation reduces firm performance,because the local human capital level cannot match the demand for high-skilled labors caused by automation.Additionally,government and market regulations in host countries aggravate the mismatch caused by automation.In order to discover more details of the effect,this study conducts heterogeneity tests,including economic development stage,institutional quality,source country disadvantage,industry type,overseas subsidiary with parent companies,and city size of host country,at country and firm levels respectively.The results are as follows.First,the negative impact of production automation on enterprise performance mainly exists in countries with higher institutional completeness,or in factor-driven countries.Second,the negative impact is also significant in enterprises with disadvantages of origin country,manufacturing industry,overseas subsidiary with parent companies,or located in large cities of host country.Furthermore,this study explores how to alleviate the negative impact of production automation on firm performance.The findings reveal that employee training,fulfillment of corporate social responsibilities and improvement of welfare benefits could be useful for these enterprises investing in BRI countries.The conclusions of this study could be helpful for Chinese enterprises which invest in BRI countries and effectively avoid the performance impact caused by technological progress.Based on the above conclusions,this paper proposes the following recommendations at both the government and enterprise levels.At the government level,it is more reasonably to arrange industrial layouts,deepen international cooperation in technology,and optimize investment risk management.At the enterprise level,it is important to conduct due diligence scientifically to reduce investment risks,adopt self-adaptive enterprise strategies to diminish human capital mismatch,and establish contingency-based organizational authorization mechanisms to enhance management efficiency.Therefore,this study focuses on the challenges faced by Chinese enterprises investing in BRI countries,which is practically significant for promoting the high-quality development of these enterprises.The contributions include:First,by incorporating the mismatch effect between production automation and human capital into the analytical framework,this study enriches the research on the relationship between production automation and firm performance.Second,by taking the regulatory constraints faced by Chinese enterprises investing in BRI countries into consideration,this study provides plausible explanations for how production automation may reduce firm performance under different investment environments.Third,based on the comprehensive interests of all stakeholders,this study explores feasible solutions to mitigate the negative impact of production automation on firm performance.
production automationfirm performancehuman capital mismatchregulatory constraintsthe belt and road
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