Using a unique firm-level dataset from China's "Silicon Valley," we investigate how multinational enterprises (MNEs) affect local entrepreneurship and R&D activities upon entry. We find that R&D activities of MNEs in an industry stimulate entry of domestic firms into the same industry and enhance R&D activities of newly entering domestic firms. By contrast, MNEs' production activities or domestic firms' R&D activities do not have such effect. Since MNEs are technologically more advanced than domestic firms, our findings suggest that diffusion of MNEs' advanced knowledge to potential indigenous entrepreneurs through MNEs' R&D stimulates entry of domestic firms.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
13618.
Length: Date of creation: Nov 2007 Date of revision: Handle: RePEc:nbr:nberwo:13618
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Find related papers by JEL classification: F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
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Arora, Ashish & Arunachalam, V. S. & Asundi, Jai & Fernandes, Ronald, 2001.
"The Indian software services industry,"
Research Policy,
Elsevier, vol. 30(8), pages 1267-1287, October.
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