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Do local manufacturing firms benefit from transactional linkages with multinational enterprises in China?

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Author Info

  • Xiaming Liu

    ([1] Southwestern University of Finance and Economics, Chengdu, China[2] School of Management, Birkbeck College, University of London, London, UK)

  • Chengang Wang

    (School of Management, University of Bradford, Bradford, UK)

  • Yingqi Wei

    (The York Management School, University of York, Heslington, York, UK)

Abstract

This paper examines the linkage effects of foreign direct investment (FDI) on firm-level productivity in Chinese manufacturing. It is found that FDI generates positive vertical linkage effects in Chinese manufacturing at both the national and regional levels, and limited positive horizontal spillovers at the regional level. While OECD firms gain from both vertical and (probably) horizontal linkages, Hong Kong, Macao and Taiwanese firms benefit only from backward linkage effects. In the domestic sector, in which we are most interested, both state-owned enterprises (SOEs) and non-SOEs are hurt by competition from foreign firms in the same industries. While SOEs gain from vertical linkages with foreign firms, non-SOEs are unable to do so. The patterns of productivity spillovers from FDI in Chinese manufacturing seem to be determined by one key factor – the technological capabilities of the firms involved. Important data limitations and policy implications of this research are discussed.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

Volume (Year): 40 (2009)
Issue (Month): 7 (September)
Pages: 1113-1130

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Handle: RePEc:pal:jintbs:v:40:y:2009:i:7:p:1113-1130

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Cited by:
  1. Tomas Havranek & Zuzana Irsova, 2010. "Which Foreigners are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan wp996, William Davidson Institute at the University of Michigan.
  2. Wang, Danny T. & Gu, Flora F. & Tse, David K. & Yim, Chi Kin (Bennett), 2013. "When does FDI matter? The roles of local institutions and ethnic origins of FDI," International Business Review, Elsevier, Elsevier, vol. 22(2), pages 450-465.
  3. Anwar, Sajid & Nguyen, Lan Phi, 2011. "Foreign direct investment and export spillovers: Evidence from Vietnam," International Business Review, Elsevier, Elsevier, vol. 20(2), pages 177-193, April.
  4. Filatotchev, Igor & Liu, Xiaohui & Lu, Jiangyong & Wright, Mike, 2011. "Knowledge spillovers through human mobility across national borders: Evidence from Zhongguancun Science Park in China," Research Policy, Elsevier, Elsevier, vol. 40(3), pages 453-462, April.
  5. Tomas Havranek & Zuzana Irsova, 2011. "How to Stir Up FDI Spillovers: Evidence from a Large Meta-Analysis," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan wp1021, William Davidson Institute at the University of Michigan.
  6. 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, Elsevier, vol. 21(3), pages 452-464.
  7. Simona, Gentile-Lüdecke & Axèle, Giroud, 2012. "Knowledge Transfer from TNCs and Upgrading of Domestic Firms: The Polish Automotive Sector," World Development, Elsevier, Elsevier, vol. 40(4), pages 796-807.
  8. Iršová, Zuzana & Havránek, Tomáš, 2013. "Determinants of Horizontal Spillovers from FDI: Evidence from a Large Meta-Analysis," World Development, Elsevier, Elsevier, vol. 42(C), pages 1-15.
  9. Huu Thanh Tam Nguyen & Nguyen Khac, 2013. "Demand creation and competition effect of Export-platform FDI on backward linkages - Evidence from panel data analysis of Vietnamese supporting industries," Documents de recherche, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne 13-02, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  10. Ouyang, Puman & Fu, Shihe, 2012. "Economic growth, local industrial development and inter-regional spillovers from foreign direct investment: Evidence from China," China Economic Review, Elsevier, Elsevier, vol. 23(2), pages 445-460.
  11. Li, Xiaoying & Wang, Jue & Liu, Xiaming, 2013. "Can locally-recruited R&D personnel significantly contribute to multinational subsidiary innovation in an emerging economy?," International Business Review, Elsevier, Elsevier, vol. 22(4), pages 639-651.
  12. Mariotti, Sergio & Nicolini, Marcella & Piscitello, Lucia, 2013. "Vertical linkages between foreign MNEs in service sectors and local manufacturing firms," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 25(C), pages 133-145.
  13. Anwar, Sajid & Nguyen, Lan Phi, 2011. "Foreign direct investment and trade: The case of Vietnam," Research in International Business and Finance, Elsevier, Elsevier, vol. 25(1), pages 39-52, January.
  14. Yanrui Wu, 2012. "R&D Behaviour in Chinese Firms," Economics Discussion / Working Papers, The University of Western Australia, Department of Economics 12-26, The University of Western Australia, Department of Economics.
  15. Siping Luo & Mary E. Lovely & David Popp, 2013. "Intellectual Returnees as Drivers of Indigenous Innovation: Evidence from the Chinese Photovoltaic Industry," NBER Working Papers 19518, National Bureau of Economic Research, Inc.

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