Assembly trade and technological catch-up: Evidence from electronics firms in China

This study evaluates technological catch-up in the electronics industry by Chinese indigenous firms compared with foreign firms operating in the country. We make use of firm-level data for the period 2001–2012, a period during which the Chinese government encouraged engagement with foreign partners and entry into the global supply chain in hopes of fostering technology transfer. We apply data envelope analysis to estimate group technology frontiers for private, state, and foreign firms, and decompose total factor productivity growth into technological change and technical efficiency change. The picture that emerges is one of mixed success. Indigenous firms on the cutting edge have pushed their group productivity frontier outward at a rapid pace even as the broad mass of indigenous firms has slipped further inside this expanding frontier. For private firms as a whole, the strongest period for technological catch-up was the mid-2000s, with progress relative to the foreign standard slowing again after that. Achievement has been greatest in sub-industries at the lower end of the technological ladder (e.g., appliances) and less notable at the upper end (e.g., computers). Evidence of a contribution by research and development and by worker training is found only beyond a cumulative threshold and for firms advantaged by location or joint venture partnership.