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Foreign direct investment spillover effects in China: Are they different across industries with different technological levels?

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  • Jeon, Yongbok
  • Park, Byung Il
  • Ghauri, Pervez N.

Abstract

Despite the impressive magnitude of inward FDI in China, empirical studies on its spillover effects are relatively scarce and have failed to find conclusive evidence. By exploring a vast firm-level panel dataset, this study aims to test empirically whether the horizontal and vertical FDI spillover effects are different among industries classified by their technological levels. Key findings are as followings: First, foreign investments in the same industry are more likely to engender negative influences on the local Chinese firms. Second, these negative horizontal effects are particularly prominent in low technology sectors. Third, the effects of foreign investments in other industries appear to be positive and significant relatively evenly across industries with different technological levels. Considered in the context of Chinese policies on FDI, these findings suggest that government policies could be a crucial factor in taking advantage of FDI spillovers.

Suggested Citation

  • Jeon, Yongbok & Park, Byung Il & Ghauri, Pervez N., 2013. "Foreign direct investment spillover effects in China: Are they different across industries with different technological levels?," China Economic Review, Elsevier, vol. 26(C), pages 105-117.
    • Handle: RePEc:eee:chieco:v:26:y:2013:i:c:p:105-117
    DOI: 10.1016/j.chieco.2013.05.001
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    More about this item

    Keywords

    FDI spillover effects; Technological level; Panel data analysis; Asia; China;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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