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R&D, Human Capital Investment and Productivity: Firm‐level Evidence from China's Electronics Industry

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  • Chih‐Hai Yang
  • Chun‐Hung Lin
  • Daw Ma

Abstract

Using firm‐level panel data covering 2005–2007, the present paper examines the effects of R&D and human capital investment on productivity in China's electronics industry. It is found that both R&D and on‐the‐job training positively contribute to total factor productivity (TFP). Firms' investment in employees' health insurance and pensions, which are components of workers' compensation, generate a productivity‐enhancing effect, supporting the efficiency wage hypothesis. The estimated impact of R&D on productivity varies among different forms of ownership, and foreign‐owned enterprises experience higher R&D efficiency than state or private enterprises. After controlling for potential endogenous causality between TFP and R&D, the above findings remain unchanged. We also find that on‐the‐job training can improve the quality of human capital and is helpful in promoting productivity. Therefore, establishing indigenous technological capability through various technological sources is quite important, and the government should devote further effort to investing in human capital.

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  • Chih‐Hai Yang & Chun‐Hung Lin & Daw Ma, 2010. "R&D, Human Capital Investment and Productivity: Firm‐level Evidence from China's Electronics Industry," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(5), pages 72-89, September.
    • Handle: RePEc:bla:chinae:v:18:y:2010:i:5:p:72-89
    DOI: 10.1111/j.1749-124X.2010.01213.x
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    2. Sai Ding & Alessandra Guariglia & Richard Harris, 2016. "The determinants of productivity in Chinese large and medium-sized industrial firms, 1998–2007," Journal of Productivity Analysis, Springer, vol. 45(2), pages 131-155, April.
    3. Yang, Chih-Hai & Tsou, Meng-Wen, 2015. "Multinational exposure, export variety and price: Evidence from Chinese electronics exporters," Journal of the Japanese and International Economies, Elsevier, vol. 38(C), pages 93-110.
    4. Esther Goya & Esther Vayá & Jordi Suriñach, 2011. "Productivity and innovation spillovers: Micro evidence from Spain," IREA Working Papers 201126, University of Barcelona, Research Institute of Applied Economics, revised Dec 2011.
    5. Pengyuan Xu & Meiqing Zhang & Min Gui, 2020. "How R&D Financial Subsidies, Regional R&D Input, and Intellectual Property Protection Affect the Sustainable Patent Output of SMEs: Evidence from China," Sustainability, MDPI, vol. 12(3), pages 1-18, February.
    6. Sun, Sizhong & Anwar, Sajid, 2019. "R&D activities and FDI in China’s iron ore mining industry," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 47-56.
    7. Sun, Sizhong & Anwar, Sajid, 2015. "R&D status and the performance of domestic firms in China's coal mining industry," Energy Policy, Elsevier, vol. 79(C), pages 99-103.
    8. Tian, Binbin & Lin, Chao & Zhang, Wenwen & Feng, Chen, 2022. "Tax Incentives, On-the-job Training, and Human Capital Accumulation: Evidence from China," China Economic Review, Elsevier, vol. 75(C).
    9. Nakatani, Ryota, 2024. "Multifactor productivity growth enhancers across industries and countries: Firm-level evidence," MPRA Paper 120503, University Library of Munich, Germany.
    10. Chang, Chong-Chuo & Tang, Hui-Wen, 2021. "Corporate cash holdings and total factor productivity – A global analysis," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    11. Bin Li & Shuai Shi & Yating Zeng, 2020. "The Impact of Haze Pollution on Firm-Level TFP in China: Test of a Mediation Model of Labor Productivity," Sustainability, MDPI, vol. 12(20), pages 1-21, October.
    12. Lin, Hui-Lin & Li, Hsiao-Yun & Yang, Chih-Hai, 2011. "Agglomeration and productivity: Firm-level evidence from China's textile industry," China Economic Review, Elsevier, vol. 22(3), pages 313-329, September.
    13. Yang, Chih-Hai & Lin, Hui-Lin & Li, Hsiao-Yun, 2013. "Influences of production and R&D agglomeration on productivity: Evidence from Chinese electronics firms," China Economic Review, Elsevier, vol. 27(C), pages 162-178.

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