Foreign Direct Investment and Servitization Transformation of Enterprises：Theory and empirical evidence from China

As manufacturing firms face growing environmental complexity and an urgent need for servitization, this study explores whether foreign investment can serve as a catalyst for this transformation. Leveraging China's large FDI inflows and gradual policy liberalization, we employ a micro-level value-added trade accounting framework and a difference-in-differences approach. Using the 2002 revision of the Catalogue for the Guidance of Foreign Investment Industries as a quasi-natural experiment, we identify the causal effect of foreign investment on enterprise servitization. The results indicate that foreign investment significantly promotes servitization, a finding that holds under parallel trend and placebo tests. Mechanism analysis reveals that this effect operates through spillover and competitive channels. Heterogeneity analysis shows the effect is stronger in firms with abundant human capital, capital-intensive industries, and regions with high marketization. Furthermore, FDI facilitates advanced servitization and enables the upgrading of traditional services through integration with modern services. These findings offer policy insights for advancing global value chain participation and industrial modernization through openness and resource integration.