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Identifying FDI spillovers


  • Lu, Yi
  • Tao, Zhigang
  • Zhu, Lianming


This paper improves on the strategy used in the literature to identify the spillover effect of horizontal foreign direct investment (FDI) by taking advantage of the plausibly exogenous relaxation of FDI regulations on China's World Trade Organization accession at the end of 2001. In addition, to understand the (aggregate) FDI spillover effect, the paper evaluates two underlying explanations (the agglomeration effect versus the competition effect, the former of which is further moderated by the absorptive capacity of domestic firms) by distinguishing different types of FDI along various dimensions. Finally, the analysis uses an array of performance measures, including total factor productivity, exporting performance, wages, R&D investment, and firm survival, with one single data set to offer a fuller and more nuanced picture of the impact of FDI on domestic firms.

Suggested Citation

  • Lu, Yi & Tao, Zhigang & Zhu, Lianming, 2017. "Identifying FDI spillovers," Journal of International Economics, Elsevier, vol. 107(C), pages 75-90.
  • Handle: RePEc:eee:inecon:v:107:y:2017:i:c:p:75-90
    DOI: 10.1016/j.jinteco.2017.01.006

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    Cited by:

    1. repec:spr:epolin:v:46:y:2019:i:1:d:10.1007_s40812-018-0104-2 is not listed on IDEAS
    2. Fiedler, Salomon & Görg, Holger & Hornok, Cecília & Jannsen, Nils & Kooths, Stefan & Marchal, Léa & Potjagailo, Galina, 2018. "Direktinvestitionen im Ausland - Effekte auf die deutsche Leistungsbilanz und Spillovers in den Empfängerländern," Kieler Beiträge zur Wirtschaftspolitik 16, Kiel Institute for the World Economy (IfW).
    3. Kun Jiang & Wolfgang Keller & Larry D. Qiu & William Ridley, 2018. "International Joint Ventures and Internal vs. External Technology Transfer: Evidence from China," CESifo Working Paper Series 7065, CESifo Group Munich.
    4. repec:bla:ecinqu:v:57:y:2019:i:1:p:372-390 is not listed on IDEAS
    5. Rajneesh Narula & André Pineli, 2019. "Improving the developmental impact of multinational enterprises: policy and research challenges," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(1), pages 1-24, March.
    6. repec:far:spaeco:y:2018:i:1:p:37-58 is not listed on IDEAS
    7. Sara L. McGaughey & Pascalis Raimondos & Lisbeth La Cour, 2018. "What is a Foreign Firm? Implications for Productivity Spillovers," CESifo Working Paper Series 7109, CESifo Group Munich.
    8. Stephan Kyburz, Huong Quynh Nguyen, 2017. "Does Proximity to Foreign Invested Firms Stimulate Productivity Growth of Domestic Firms? Firmlevel Evidence from Vietnam," Diskussionsschriften credresearchpaper16, Universitaet Bern, Departement Volkswirtschaft - CRED.
    9. Nicola Cortinovis & Riccardo Crescenzi & Frank van Oort, 2018. "Multinational enterprises, industrial relatedness and employment in European regions," Papers in Evolutionary Economic Geography (PEEG) 1802, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jan 2018.
    10. repec:kap:jinten:v:15:y:2017:i:4:d:10.1007_s10843-017-0205-4 is not listed on IDEAS
    11. Lu, Yi & Sugita, Yoichi & Zhu, Lianming, 2019. "Wage and Markdowns and FDI Liberalization," Discussion paper series HIAS-E-83, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    12. repec:taf:jitecd:v:28:y:2019:i:1:p:1-10 is not listed on IDEAS
    13. Jiang, Kun & Keller, Wolfgang & Qiu, Larry & Ridley, William, 2018. "International Joint Ventures and Internal versus External Technology Transfer: Evidence from China," CEPR Discussion Papers 12809, C.E.P.R. Discussion Papers.

    More about this item


    FDI spillovers; Difference-in-differences; Agglomeration effect; Competition effect; Absorptive capacity; China;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics


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