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How do Chinese industries benefit from FDI spillovers?

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  • Ito, Banri
  • Yashiro, Naomitsu
  • Xu, Zhaoyuan
  • Chen, XiaoHong
  • Wakasugi, Ryuhei

Abstract

Recently, Foreign Invested Enterprises (FIEs) in China have increased their investment in not only production activity but also R&D activity. This paper examines the impact of spillovers from such activities by FIEs on two types of innovations by Chinese domestic firms: Total Factor Productivity (TFP) and invention patent application, using comprehensive industry and province-level data. We evaluate such spillovers according to FIEs' ownership structure, the origin of foreign funds and whether they are from the same industry or from other industries. We find an interesting asymmetry between spillovers to TFP and invention patent applications; while we do not find significant intra-industry spillovers from FIEs but find robust inter-industries spillover related to TFP, we find substantial intra-industry spillovers promoting invention patent applications but no evidence of inter-industries spillovers. Furthermore, whereas spillovers from FIEs to Chinese firms' TFP stem from their production activities, the source of spillovers related to invention patent applications is mostly through their R&D activity. Our findings indicate a need for multidimensional evaluation of the role of FDI in developing countries.

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Bibliographic Info

Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 23 (2012)
Issue (Month): 2 ()
Pages: 342-356

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Handle: RePEc:eee:chieco:v:23:y:2012:i:2:p:342-356

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

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Keywords: China; FDI spillovers; R&D; Innovation;

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Cited by:
  1. Nasser Ary Tanimoune & Cécile Batisse & Mary-Françoise Renard, 2013. "Foreign Direct Investment across China: what should we learn from spatial dependences?," Working Papers halshs-00878888, HAL.

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