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FDI, trade, and spillover efficiency: evidence from China's manufacturing sector

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  • Yih-Chyi Chuang
  • Pi-Fum Hsu

Abstract

Using firm data from the 1995 Third Industrial Census of China, this paper finds that the presence of foreign ownership has a positive and significant effect on domestic firms' productivity. Moreover, trading with more advanced countries helps China gain access to new technology and information, which improves its productivity and enables it to compete in international markets. It is found that China's imports from OECD and the four Asian Tigers, and exports to OECD have positive effects on domestic firms' productivity. By dividing industries into high-technology-gap and low-technology-gap groups, it is found that the spillover effects of FDI are larger for the low-technology-gap group than for the high-technology-gap group. However, the estimation results of the trade-induced technology spillover effect support the technology-gap learning theory and the significance of importing appropriate technology.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 36 (2004)
Issue (Month): 10 ()
Pages: 1103-1115

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Handle: RePEc:taf:applec:v:36:y:2004:i:10:p:1103-1115

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References

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  1. Edward E. Leamer & Christopher F. Thornberg, 2000. "Effort and Wages: A New Look at the Interindustry Wage Differentials," NBER Chapters, in: The Impact of International Trade on Wages, pages 37-84 National Bureau of Economic Research, Inc.
  2. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-77, July.
  3. Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August.
  4. Kokko, Ari & Tansini, Ruben & Zejan, Mario, 1994. "Productivity Spillovers from FDI in the Uruguayan Manufacturing Sector," Working Paper Series in Economics and Finance 2, Stockholm School of Economics.
  5. Magnus Blomstrom & Edward N. Wolff, 1994. "Multinational Corporations and Productivity Convergence in Mexico," NBER Working Papers 3141, National Bureau of Economic Research, Inc.
  6. Berthelemy, Jean-Claude & Demurger, Sylvie, 2000. "Foreign Direct Investment and Economic Growth: Theory and Application to China," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 140-55, June.
  7. Forsund, Finn R & Jansen, Eilev S, 1977. "On Estimating Average and Best Practice Homothetic Production Functions via Cost Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 463-76, June.
  8. Green, Alison & Mayes, David, 1991. "Technical Inefficiency in Manufacturing Industries," Economic Journal, Royal Economic Society, vol. 101(406), pages 523-38, May.
  9. Yih-Chyi Chuang & Chi-Mei Lin, 1999. "Foreign direct investment, R&D and spillover efficiency: Evidence from Taiwan's manufacturing firms," Journal of Development Studies, Taylor & Francis Journals, vol. 35(4), pages 117-137.
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Citations

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Cited by:
  1. Fan, Joseph P.H. & Huang, Jun & Zhu, Ning, 2013. "Institutions, ownership structures, and distress resolution in China," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 71-87.
  2. Yao, Shujie & Wei, Kailei, 2007. "Economic growth in the presence of FDI: The perspective of newly industrialising economies," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 211-234, March.
  3. Linda Yueh & Linda Yueh & John Van Reenen, 2012. "Why has China grown so fast? The role of international technology transfer," Economics Series Working Papers 592, University of Oxford, Department of Economics.
  4. Mebratie, Anagaw Derseh & Bedi, Arjun S., 2011. "Foreign Direct Investment, Black Economic Empowerment and Labour Productivity in South Africa," IZA Discussion Papers 6048, Institute for the Study of Labor (IZA).
  5. Anagaw Derseh Mebratie & Peter A. G. van Bergeijk, 2013. "Firm heterogeneity and development: A meta-analysis of FDI productivity spillovers," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(1), pages 52-70, February.
  6. Ann Harrison & Andrés Rodríguez-Clare, 2009. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," NBER Working Papers 15261, National Bureau of Economic Research, Inc.
  7. Markus Eberhardt & Christian Helmers & Zhihong Yu, 2011. "Is the Dragon Learning to Fly? An Analysis of the Chinese Patent Explosion," CSAE Working Paper Series 2011-15, Centre for the Study of African Economies, University of Oxford.
  8. Mercedes Gumbau Albert & Joaquín Maudos Villarroya, 2006. "Patents, Technological Inputs And Spillovers Among Regions," Working Papers. Serie EC 2006-11, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Sangho KIM & Hyunjoon LIM & Donghyun PARK, 2007. "The Effect of Imports and Exports on Total Factor Productivity in Korea," Discussion papers 07022, Research Institute of Economy, Trade and Industry (RIETI).
  10. 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, vol. 40(3), pages 453-462, April.
  11. Ellis, Paul D., 2010. "International trade intermediaries and the transfer of marketing knowledge in transition economies," International Business Review, Elsevier, vol. 19(1), pages 16-33, February.
  12. BAAK, SaangJoon, 2008. "The bilateral real exchange rates and trade between China and the U.S," China Economic Review, Elsevier, vol. 19(2), pages 117-127, June.
  13. Sun, Sizhong, 2009. "The role of foreign firms in domestic exporting," MPRA Paper 18486, University Library of Munich, Germany.
  14. Naudé, Wim & Szirmai, Adam & Lavopa, Alejandro, 2013. "Industrialization Lessons from BRICS: A Comparative Analysis," IZA Discussion Papers 7543, Institute for the Study of Labor (IZA).
  15. Sun, Sizhong, 2012. "The role of FDI in domestic exporting: Evidence from China," Journal of Asian Economics, Elsevier, vol. 23(4), pages 434-441.
  16. Liu, Xiaohui & Buck, Trevor, 2007. "Innovation performance and channels for international technology spillovers: Evidence from Chinese high-tech industries," Research Policy, Elsevier, vol. 36(3), pages 355-366, April.
  17. Yaojun Yao, 2011. "International trade and technological progress in china: Evidence from time series," Frontiers of Economics in China, Springer, vol. 6(3), pages 464-478, September.

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