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The impact of foreign ownership, local ownership and industry characteristics on spillover benefits from foreign direct investment in China

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  • Buckley, Peter J.
  • Wang, Chengqi
  • Clegg, Jeremy
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    Abstract

    This paper finds that significant variation in FDI spillover effects on local industry is obscured through the aggregation common in most studies. Breaking Chinese industrial data for 2001 down by category of ownership of foreign investor, local firm, and by host industry, we find evidence of greater positive spillovers from FDI in technology-intensive industries than in labour-intensive industries. We also find that overseas Chinese affiliates from Hong Kong, Macau and Taiwan (HMT) generate spillovers to locally owned enterprises (LOEs) in labour-intensive industries, in contrast to western affiliates, which positively impact on the performance of LOEs in technology-intensive industries. Chinese state-owned enterprises (SOEs) benefit from the presence of both HMT affiliates in labour-intensive industries and of western affiliates in technology-intensive industries. Other LOEs (OLOEs), however, benefit only from HMT affiliates' presence in labour-intensive industries. These findings offer some support to host government policies offering generous incentive packages to attract foreign investors in high-technology industries. We find that some aspects of China's status as a transition economy--for example the considerable resources and effective control deployed by the state and SOEs--has helped its development process; however we argue that it is possible for non-transition developing economies to implement similar policies.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 16 (2007)
    Issue (Month): 2 (April)
    Pages: 142-158

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    Handle: RePEc:eee:iburev:v:16:y:2007:i:2:p:142-158

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    Related research

    Keywords: FDI MNEs Spillover effects China Industry Locally owned enterprises Transitional economy;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Citations

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    Cited by:
    1. Hamida, Lamia Ben, 2013. "Are there regional spillovers from FDI in the Swiss manufacturing industry?," International Business Review, Elsevier, vol. 22(4), pages 754-769.
    2. Krammer, Sorin, 2013. "Assessing the relative importance of multiple channels for embodied and disembodied technological spillovers," MPRA Paper 53676, University Library of Munich, Germany.
    3. Wang, Lili & Meijers, Huub & Szirmai, Eddy, 2013. "Technological spillovers and industrial growth in Chinese regions," MERIT Working Papers 044, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    4. Halkos, George Emmanuel & Tzeremes, Nickolaos G., 2007. "Productivity efficiency and firm size: An empirical analysis of foreign owned companies," International Business Review, Elsevier, vol. 16(6), pages 713-731, December.
    5. Farole, Thomas & Winkler, Deborah, 2012. "Foreign firm characteristics, absorptive capacity and the institutional framework : the role of mediating factors for FDI spillovers in low- and middle-income countries," Policy Research Working Paper Series 6265, The World Bank.
    6. Ben Hamida, Lamia & Gugler, Philippe, 2009. "Are there demonstration-related spillovers from FDI?: Evidence from Switzerland," International Business Review, Elsevier, vol. 18(5), pages 494-508, October.
    7. Wang, Chengqi & Hong, Junjie & Kafouros, Mario & Boateng, Agyenim, 2012. "What drives outward FDI of Chinese firms? Testing the explanatory power of three theoretical frameworks," International Business Review, Elsevier, vol. 21(3), pages 425-438.
    8. Dahai Fu & Yanrui Wu, 2011. "Export Wage Premium in China's Manufacturing Sector: A Firm Level Analysis," Economics Discussion / Working Papers 11-22, The University of Western Australia, Department of Economics.
    9. Fu, Xiaolan & Helmers, Christian & Zhang, Jing, 2012. "The two faces of foreign management capabilities: FDI and productive efficiency in the UK retail sector," International Business Review, Elsevier, vol. 21(1), pages 71-88.
    10. Beugelsdijk, Sjoerd & Smeets, Roger & Zwinkels, Remco, 2008. "The impact of horizontal and vertical FDI on host's country economic growth," International Business Review, Elsevier, vol. 17(4), pages 452-472, August.
    11. Wang, Chengqi & Kafouros, Mario I., 2009. "What factors determine innovation performance in emerging economies? Evidence from China," International Business Review, Elsevier, vol. 18(6), pages 606-616, December.
    12. Fetscherin, Marc & Voss, Hinrich & Gugler, Philippe, 2010. "30 Years of foreign direct investment to China: An interdisciplinary literature review," International Business Review, Elsevier, vol. 19(3), pages 235-246, June.
    13. Todo, Yasuyuki & Zhang, Weiying & Zhou, Li-An, 2009. "Knowledge spillovers from FDI in China: The role of educated labor in multinational enterprises," Journal of Asian Economics, Elsevier, vol. 20(6), pages 626-639, November.
    14. Wang, Chengqi & Deng, Ziliang & Kafouros, Mario I. & Chen, Yan, 2012. "Reconceptualizing the spillover effects of foreign direct investment: A process-dependent approach," International Business Review, Elsevier, vol. 21(3), pages 452-464.
    15. Rajah Rasiah, 2012. "Book Review: The Rise of Indian Multinationals: Perspectives on Indian Outward Foreign Direct Investment, by Karl Sauvant and Jaya Prakash Pradhan (eds), with Ayesha Chatterjee and Brian Harley, New Y," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 4(3), pages 185-188, October.
    16. Kotabe, Masaaki & Jiang, Crystal Xiangwen & Murray, Janet Y., 2011. "Managerial ties, knowledge acquisition, realized absorptive capacity and new product market performance of emerging multinational companies: A case of China," Journal of World Business, Elsevier, vol. 46(2), pages 166-176, April.
    17. Hallin, Christina & Holmström Lind, Christine, 2012. "Revisiting the external impact of MNCs: An empirical study of the mechanisms behind knowledge spillovers from MNC subsidiaries," International Business Review, Elsevier, vol. 21(2), pages 167-179.
    18. Tomáš Havránek & Zuzana Iršová, 2010. "Meta-Analysis of Intra-Industry FDI Spillovers: Updated Evidence," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 60(2), pages 151-174, May.
    19. García, Francisco & Avella, Lucía & Fernández, Esteban, 2012. "Learning from exporting: The moderating effect of technological capabilities," International Business Review, Elsevier, vol. 21(6), pages 1099-1111.
    20. Buckley, Peter J., 2009. "Internalisation thinking: From the multinational enterprise to the global factory," International Business Review, Elsevier, vol. 18(3), pages 224-235, June.

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