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Are There Productivity Spillovers From Foreign Direct Investment In China?

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  • GALINA HALE
  • CHERYL LONG

Abstract

We review previous literature on productivity spillovers of foreign direct investment (FDI) in China and conduct our own analysis using a firm-level data set from a World Bank survey. We find that the evidence of FDI spillovers on the productivity of Chinese domestic firms is mixed, with many positive results largely due to aggregation bias or failure to control for endogeneity of FDI. Attempting over 2500 specifications which take into account forward and backward linkages, we fail to find evidence of systematic positive productivity spillovers from FDI.spillovers from FDI. We do, however, find robust evidence that Chinese private firms tend to invest less in innovation in the presence of FDI. Combined with our previous findings that domestic private firms tend to be more involved in providing inputs and intermediary goods for foreign firms (Hale and Long, 2006), these results suggest a more passive role played by domestic firms in the global division of labor than envisioned by the Chinese government. ; Formerly titled: What determines technological spillovers of foreign direct investment: evidence from China

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Pacific Economic Review.

Volume (Year): 16 (2011)
Issue (Month): 2 (05)
Pages: 135-153

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Handle: RePEc:bla:pacecr:v:16:y:2011:i:2:p:135-153

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  1. Wolfgang Keller & Stephen R. Yeaple, 2003. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," Working Papers 2003-06, Brown University, Department of Economics.
  2. Lutz, Stefan H. & Talavera, Oleksandr, 2003. "Do Ukrainian firms benefit from FDI," ZEI Working Papers B 04-2003, ZEI - Center for European Integration Studies, University of Bonn.
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  10. Stephen R. Yeaple & Wolfgang Keller, 2003. "Multinational Enterprises, International Trade, and Productivity Growth," IMF Working Papers 03/248, International Monetary Fund.
  11. Blomström, Magnus & Globerman, Steven & Kokko, Ari, 1999. "The Determinants of Host Country Spillovers from Foreign Direct Investment: Review and Synthesis of the Literature," Working Paper Series in Economics and Finance 339, Stockholm School of Economics.
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