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Cultural Proximity and Local Firms’ catch up with Multinational Enterprises

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  • Wang, Jue
  • Liu, Xiaming
  • Wei, Yingqi
  • Wang, Chengang

Abstract

Integrating and extending new growth theory and resource-based views, this paper provides a theoretical foundation for the catch-up hypothesis. It examines the role of technology gap, technological capability, and cultural proximity in local firms’ catch-up with MNEs. Hypotheses are developed and tested with a dynamic model on a large firm-level panel dataset from Chinese manufacturing. The results confirm that catch-up is positively related to technology gap and technological capability. Furthermore, in the presence of cultural proximity, the speed of local Chinese firms’ catch-up with MNEs from Hong Kong, Macau, and Taiwan is not significantly lower than that with other MNEs.

Suggested Citation

  • Wang, Jue & Liu, Xiaming & Wei, Yingqi & Wang, Chengang, 2014. "Cultural Proximity and Local Firms’ catch up with Multinational Enterprises," World Development, Elsevier, vol. 60(C), pages 1-13.
    • Handle: RePEc:eee:wdevel:v:60:y:2014:i:c:p:1-13
    DOI: 10.1016/j.worlddev.2014.02.010
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