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Foreign direct investment, access to finance, and innovation activity in Chinese enterprises

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  • Girma, Sourafel
  • Gong, Yundan
  • Görg, Holger

Abstract

A recent, comprehensive database is used to investigate the link between inward foreign direct investment (FDI) and innovation activity in China. The results of the analysis suggest that private and collectively owned firms with foreign capital participation and those with good access to domestic bank loans innovate more than other firms do. Among enterprises not owned by the state, inward FDI at the sectoral level is positively associated with domestic innovative activity only among firms that engage in their own research and development or that have good access to domestic finance. At the sector level the effect of inward FDI into technology transfer is distinguished from the effect on domestic credit opportunities. FDI affecting credit is of little significance for state-owned enterprises and is independent of their access to finance. In contrast, better access to credit is an important channel through which FDI affects the innovation of domestic private and collectively owned enterprises. --

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Paper provided by Kiel Institute for the World Economy (IfW) in its series Open Access Publications from Kiel Institute for the World Economy with number 28838.

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Date of creation: 2008
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Handle: RePEc:zbw:ifwkie:28838

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  1. Harrison, Ann E. & Love, Inessa & McMillan, Margaret S., 2004. "Global capital flows and financing constraints," Journal of Development Economics, Elsevier, vol. 75(1), pages 269-301, October.
  2. International Monetary Fund, 2005. "Trade Costs and Location of Foreign Firms in China," IMF Working Papers 05/55, International Monetary Fund.
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  5. Chiara Criscuolo & Jonathan E. Haskel & Matthew J. Slaughter, 2005. "Global Engagement and the Innovation Activities of Firms," NBER Working Papers 11479, National Bureau of Economic Research, Inc.
  6. Ann P. Bartel & Ann E. Harrison, 2005. "Ownership Versus Environment: Disentangling the Sources of Public-Sector Inefficiency," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 135-147, February.
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  9. Harrison, Ann E. & McMillan, Margaret S., 2003. "Does direct foreign investment affect domestic credit constraints?," Journal of International Economics, Elsevier, vol. 61(1), pages 73-100, October.
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Cited by:
  1. Horst Raff & Joachim Wagner, 2013. "Foreign Ownership and the Extensive Margins of Exports: Evidence for Manufacturing Enterprises in Germany," Kiel Working Papers 1845, Kiel Institute for the World Economy.
  2. Horst Raff & Natalia Trofimenko, 2013. "World Market Access of Emerging-Market Firms: The Role of Foreign Ownership and Access to External Finance," CESifo Working Paper Series 4346, CESifo Group Munich.
  3. ITO Banri & YASHIRO Naomitsu & XU Zhaoyuan & CHEN Xiaohong & WAKASUGI Ryuhei, 2010. "How Do Chinese Industries Benefit from FDI Spillovers?," Discussion papers 10026, Research Institute of Economy, Trade and Industry (RIETI).
  4. Megha Mukim, 2011. "Does agglomeration boost innovation? An econometric evaluation," ERSA conference papers ersa10p1356, European Regional Science Association.
  5. Natasha Agarwal & Chris Milner & Alejandro Riaño, 2013. "Credit Constraints and FDI Spillovers in China," CESifo Working Paper Series 4313, CESifo Group Munich.

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