IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v42y2016icp423-429.html
   My bibliography  Save this article

Absorptive capacity and benefits from FDI: Evidence from Chinese manufactured exports

Author

Listed:
  • Tang, Yingkai
  • Zhang, Kevin H.

Abstract

China's global export rank rose from the 32nd in 1978 to the 1st in 2009, and in the same period China had been a top recipient of foreign direct investment (FDI) in the world. Does large FDI inflow automatically lead to the export boom? Or is it a must for China to have certain absorptive capacity (AC) given FDI? This work investigates how manufacturing exports (MX) are affected by the AC-FDI interaction. MX performance is assessed by three indicators: export capacity, export intensity, and export quality. AC is defined as a host-country's ability to capture potential benefits from FDI, and such ability is proxied by government FDI policy, human capital, R&D, and infrastructure. Estimates are conducted with the data on 21 manufacturing sectors for 31 regions over 8years (2005–2012). We find that (a) AC is necessary condition for China to benefit from FDI in MX, and contributions of FDI alone to MX are limited; (b) China's strong AC largely comes from well-designed FDI policy and high quality infrastructure, both of which complement with FDI in strengthening export capacity, intensity and quality; and (c) human capital and R&D seems to be more helpful for China to capture spillovers from FDI to export quality.

Suggested Citation

  • Tang, Yingkai & Zhang, Kevin H., 2016. "Absorptive capacity and benefits from FDI: Evidence from Chinese manufactured exports," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 423-429.
  • Handle: RePEc:eee:reveco:v:42:y:2016:i:c:p:423-429
    DOI: 10.1016/j.iref.2015.10.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S105905601500163X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Harrison, Ann & Rodríguez-Clare, Andrés, 2010. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," Handbook of Development Economics, Elsevier.
    2. Aitken, Brian & Hanson, Gordon H. & Harrison, Ann E., 1997. "Spillovers, foreign investment, and export behavior," Journal of International Economics, Elsevier, vol. 43(1-2), pages 103-132, August.
    3. Richard Kneller & Mauro Pisu, 2007. "Industrial Linkages and Export Spillovers from FDI," The World Economy, Wiley Blackwell, vol. 30(1), pages 105-134, January.
    4. James B. Ang & Jakob B. Madsen, 2011. "Can Second-Generation Endogenous Growth Models Explain the Productivity Trends and Knowledge Production in the Asian Miracle Economies?," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1360-1373, November.
    5. Bruce A. Blonigen & Alyson C. Ma, 2019. "Please Pass the Catch-Up: The Relative Performance of Chinese and Foreign Firms in Chinese Exports," World Scientific Book Chapters,in: Foreign Direct Investment, chapter 12, pages 401-445 World Scientific Publishing Co. Pte. Ltd..
    6. Dani Rodrik, 2006. "What's So Special about China's Exports?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(5), pages 1-19, September.
    7. Deborah L. Swenson, 2008. "Multinationals and the creation of Chinese trade linkages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 596-618, May.
    8. Zhi Wang & Shang-Jin Wei, 2010. "What Accounts for the Rising Sophistication of China's Exports?," NBER Chapters,in: China's Growing Role in World Trade, pages 63-104 National Bureau of Economic Research, Inc.
    9. Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-level Productivity…For Some Plants," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1051-1099.
    10. Xing, Yuqing, 2012. "The People’s Republic of China’s High-tech Exports: Myth and Reality," ADBI Working Papers 357, Asian Development Bank Institute.
    11. repec:wsi:wschap:9789814749237_0010 is not listed on IDEAS
    12. Rachel Griffith & Stephen Redding & John Van Reenen, 2003. "R&D and Absorptive Capacity: Theory and Empirical Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(1), pages 99-118, March.
    13. Sourafel Girma & Holger Görg & Mauro Pisu, 2016. "Exporting, linkages and productivity spillovers from foreign direct investment," World Scientific Book Chapters,in: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT Volume 53: World Scientific Studies in International Economics, chapter 10, pages 191-211 World Scientific Publishing Co. Pte. Ltd..
    14. Sourafel Girma, 2005. "Absorptive Capacity and Productivity Spillovers from FDI: A Threshold Regression Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 281-306, June.
    15. Yuqing Xing, 2012. "The People’s Republic of China’s High-Tech Exports : Myth and Reality," Macroeconomics Working Papers 23320, East Asian Bureau of Economic Research.
    16. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    17. Ram, Rati & Zhang, Kevin Honglin, 2002. "Foreign Direct Investment and Economic Growth: Evidence from Cross-Country Data for the 1990s," Economic Development and Cultural Change, University of Chicago Press, vol. 51(1), pages 205-215, October.
    18. Xiaobo Zhang & Kevin Zhang, 2003. "How Does Globalisation Affect Regional Inequality within A Developing Country? Evidence from China," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 47-67.
    19. Zhang, Kevin Honglin & Markusen, James R., 1999. "Vertical multinationals and host-country characteristics," Journal of Development Economics, Elsevier, vol. 59(2), pages 233-252, August.
    20. Marco Fugazza, 2004. "Export Performance And Its Determinants: Supply And Demand Constraints," UNCTAD Blue Series Papers 26, United Nations Conference on Trade and Development.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:taf:jitecd:v:28:y:2019:i:1:p:1-10 is not listed on IDEAS

    More about this item

    Keywords

    Absorptive capability (AC); Foreign direct investment (FDI); Manufactured exports (MX);

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:42:y:2016:i:c:p:423-429. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.