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Capital or knowhow: The role of foreign multinationals in Sino-foreign joint ventures

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  • Bai, Chong-En
  • Lu, Jiangyong
  • Tao, Zhigang

Abstract

China's success in attracting foreign direct investment has been cast in doubt as mainly a transfer of capital, not knowhow, because its financial system is incapable of allocating domestic savings and hard-earned foreign reserves to domestic enterprises. To shed light on this debate, we examine the determinants of equity sharing in Sino-foreign joint ventures with the premise that the roles of foreign direct investment (in transferring capital or knowhow) should be reflected in equity sharing between multinational firms and local firms. Our empirical analysis offers strong evidence for foreign direct investment as a transfer of knowhow, but limited support for foreign direct investment as a transfer of capital, which points to the need for further reform in China's financial system.

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Bibliographic Info

Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 21 (2010)
Issue (Month): 4 (December)
Pages: 629-638

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Handle: RePEc:eee:chieco:v:21:y:2010:i:4:p:629-638

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Web page: http://www.elsevier.com/locate/chieco

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Keywords: Foreign direct investment Multinational firms Equity joint ventures Capital Knowhow;

References

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Cited by:
  1. Shahid Yusuf, 2012. "From Technological Catch-up to Innovation : The Future of China’s GDP Growth," World Bank Other Operational Studies 12781, The World Bank.
  2. Bai, Chong-En & Qian, Yingyi, 2010. "Infrastructure development in China: The cases of electricity, highways, and railways," Journal of Comparative Economics, Elsevier, vol. 38(1), pages 34-51, March.
  3. Bai, Chong-En & Ma, Hong & Pan, Wenqing, 2012. "Spatial spillover and regional economic growth in China," China Economic Review, Elsevier, vol. 23(4), pages 982-990.

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