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The level of human capital in innovative firms located in China. Is foreign capital relevant?

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  • Li Shu

    ()
    (Faculdade de Economia, Universidade do Porto)

  • Aurora A.C. Teixeira

    ()
    (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Porto; OBEGEF)

Abstract

Studies on the impact of Foreign Direct Investment (FDI) on the Chinese economy have essentially focused on the relationship between FDI, productivity and economic growth, revealing a tendency toward sectoral and macroeconomic empirical studies. This work aims to complement these approaches and contribute to the rather limited literature on the relationship between FDI, Human Capital and Innovation at a corporate level. Based on a set of large and innovative firms (national and foreign capital) located in China, we have concluded that: i) the direct impact of foreign capital on the level of human capital in firms is negative, that is, no evidence was found suggesting that FDI has a positive influence on their human capital; ii) in indirect terms, by means of investment in R&D activities, FDI has a positive impact on general human capital (i.e., formal education). These results suggest that for China to benefit from FDI, it is necessary to implement a selective policy to attract FDI, taking into account more technologically advanced projects.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 391.

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Length: 22 pages
Date of creation: Nov 2010
Date of revision:
Handle: RePEc:por:fepwps:391

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Keywords: Foreign Direct Investment; Multinational firms; Human Capital; R&D; China;

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  1. Liu, Xiaohui & Wang, Chenggang, 2003. "Does foreign direct investment facilitate technological progress?: Evidence from Chinese industries," Research Policy, Elsevier, vol. 32(6), pages 945-953, June.
  2. K. C. Fung & Alicia García-Herrero & Hitomi Iizaka & Alan Siu, 2006. "Hard or Soft? Institutional Reforms and Infrastructure Spending as Determinants of Foreign Direct Investment in China," Banco de Espa�a Working Papers 0616, Banco de Espa�a.
  3. Laura Abramovsky & Helen Simpson, 2008. "Geographic Proximity and Firm-University Innovation Linkages: evidence from Great Britain," The Centre for Market and Public Organisation 08/200, Department of Economics, University of Bristol, UK.
  4. Zhaoyong Zhang, 2002. "Productivity And Economic Growth: An Empirical Assessment Of The Contribution Of Fdi To The Chinese Economy," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 27(2), pages 81-94, December.
  5. Ana Teresa Tavares & Aurora A. C. Teixeira, 2005. "Human Capital Intensity in Technology-Based Firms Located in Portugal: Do Foreign Multinationals Make a Difference?," FEP Working Papers 187, Universidade do Porto, Faculdade de Economia do Porto.
  6. Aurora Teixeira, 2002. "On the Link between Human Capital and Firm Performance. A Theoretical and Empirical Survey," FEP Working Papers 121, Universidade do Porto, Faculdade de Economia do Porto.
  7. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
  8. Xu, Bin, 2000. "Multinational enterprises, technology diffusion, and host country productivity growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 477-493, August.
  9. Roger J. Calantone & Jeffrey B. Schmidt & X. Michael Song, 1996. "Controllable Factors of New Product Success: A Cross-National Comparison," Marketing Science, INFORMS, vol. 15(4), pages 341-358.
  10. Alejandro Ciruelos & Miao Wang, 2005. "International Technology Diffusion: Effects of Trade and FDI," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(4), pages 437-449, December.
  11. Liu, Xiaming & Parker, David & Vaidya, Kirit & Wei, Yingqi, 2001. "The impact of foreign direct investment on labour productivity in the Chinese electronics industry," International Business Review, Elsevier, vol. 10(4), pages 421-439, August.
  12. Tam B. Vu & Byron Gangnes & Ilan Noy, 2008. "Is Foreign Direct Investment Good for Growth? Evidence from Sectoral Analysis of China and Vietnam," Working Papers 200801, University of Hawaii at Manoa, Department of Economics.
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