Foreign Direct Investment, Access to Finance, and Innovation Activity in Chinese Enterprises
AbstractThis paper investigates the link between inward FDI and innovation activity in China, using a very comprehensive and recent firm level database. We pay particular attention to the impact of domestic access to finance. Our results show that firms with foreign capital participation or those with good access to domestic bank loans innovate more than others do. We also find that inward FDI at the sectoral level is positively associated with domestic innovative activity only if firms engage in own R&D or if they have good access to domestic finance. However, access to finance only plays a role for private or collectively owned firms, less so for state-owned enterprises. Furthermore, we distinguish the effect of sector level inward FDI into technology transfer and FDI affecting domestic credit opportunities and find that the latter is of very little significance for SOEs and is also independent of their access to finance. By contrast, it is an important channel through which FDI affects the innovation of domestic private and collectively owned enterprises.
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Bibliographic InfoPaper provided by University of Nottingham, GEP in its series Discussion Papers with number 07/44.
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Innovation; FDI; finance; China;
Other versions of this item:
- Sourafel Girma & Yundan Gong & Holger Görg, 2008. "Foreign Direct Investment, Access to Finance, and Innovation Activity in Chinese Enterprises," World Bank Economic Review, World Bank Group, vol. 22(2), pages 367-382, June.
- Sourafel Girma & Yundan Gong & Holger Görg, 2008. "Foreign direct investment, access to finance, and innovation activity in Chinese enterprises," Kiel Working Papers 1400, Kiel Institute for the World Economy.
- Girma, Sourafel & Gong, Yundan & Görg, Holger, 2008. "Foreign direct investment, access to finance, and innovation activity in Chinese enterprises," Open Access publications from Kiel Institute for the World Economy info:hdl:10419/28838, Kiel Institute for the World Economy.
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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