This paper empirically investigates the effect of improved transportation system on innovation activities in a panel of Chinese cities. We find robust evidence that there is a significant increase in a city’s capacity in invention patents due to the opening of the high-speed railway (HSR). Furthermore, increased expenditure in research and development (R&D), expanded business opportunities through trade and foreign direct investment, and intensified import competition are three plausible channels that allow the opening of HSR to spur city innovation.

Institutional factors are a critical driving force for the rapid growth of outward foreign direct investment (FDI) in developing countries. This article attempts to explain how developing countries can take advantage of bilateral investment treaties (BITs) to reduce investment uncertainties caused by informal institutional distance and help domestic companies invest abroad. The results confirm that the cultural difference between China and a host country is negatively associated with the likelihood of FDI entry into the host country. BITs function as a substitute for the host country’s institutional environment by reducing investment uncertainties caused by cultural distance. Moreover, state-owned enterprises are less responsive to BITs in host countries than private enterprises, suggesting that private firms rely more on BITs to reduce their investment risks abroad.

Purpose: The purpose of this paper is to argue that financial development, measured by private credit in the economy, affects exports in an inverted U-shaped manner. The authors use the new trade theory model and empirical data to analyze whether the financial system is the reason of global imbalance. Design/methodology/approach: This paper builds a simple production model to connect financial development with a country’s export or outward foreign direct investment (ODI) decision. Using a panel data covering 108 countries for the period 1990-2011, the authors find strong evidence to show that when a country is at a lower financial development level, further advancements of its financial system will boost exports. Findings: First, an inverted U-shaped relationship between exports, imports and financial development is found in the study of 108 countries over the period 1990-2011; second, ODI provides a substitute effect to exports for financially advanced countries. These findings have provided an alternative explanation to international trade imbalances and contribute constructively to the discussion regarding whether exports and financial development are positively related or not. Originality/value: As a result, the findings shed some light on the issue of global current account imbalances between developing and developed countries from a new perspective.