Fdi And Spillovers In China: Non-Linearity And Absorptive Capacity
AbstractUsing a fixed effect variance decomposition model, we estimate SUR models to analyze FDI spillovers from contagion and spillovers from competition on local firms in China. While the former type of spillover mainly depends on the degree of foreign presence in the local industry, the latter kind is related to how foreign and local firms interact. The main conclusion is that FDI has been beneficial for the Chinese economy, but that spillovers are not evenly distributed across firms and industries. Spillovers from contagion tend to exhibit an inverse U-shaped pattern with respect to the degree of foreign presence at the industry level, whereas spillovers from competition exhibit a more linear pattern with respect to the level of technological sophistication in foreign firms. Industries with high absorptive capacity and/or high efficiency are the ones best equipped to take advantage of spillovers from foreign-owned firms. Moreover, there are signs of substantial competition between foreign-owned firms: an increase in the foreign capital share in an industry seems to have a stronger effect on incumbent foreign-owned firms than on domestic firms.
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Bibliographic InfoPaper provided by China Economic Research Center, Stockholm School of Economics in its series Working Paper Series with number 2010-12.
Length: 28 pages
Date of creation: 01 Jan 2010
Date of revision:
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More information through EDIRC
Spillovers; China; FDI; Fixed effect variance decomposition;
Other versions of this item:
- Taotao Chen & Ari Kokko & Patrik Gustavsson Tingvall, 2011. "FDI and spillovers in China: non-linearity and absorptive capacity," Journal of Chinese Economic and Business Studies, Taylor and Francis Journals, vol. 9(1), pages 1-22.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-23 (All new papers)
- NEP-CSE-2010-01-23 (Economics of Strategic Management)
- NEP-DEV-2010-01-23 (Development)
- NEP-INT-2010-01-23 (International Trade)
- NEP-TRA-2010-01-23 (Transition Economics)
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