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Total Factor Productivity, Foreign Direct Investment, and Entry Barriers in the Chinese Automotive Industry

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  • Firat Demir
  • Li Su

Abstract

We explore three questions on foreign direct investment (FDI): (1) What are the differences in entry barriers for foreign, public, and private investors? (2) What are the effects of past productivity levels on future foreign direct investment (FDI) decisions? (3) What is the effect of equity structure on future total factor productivity (TFP) levels? The empirical results based on a monopolistic competition model and using a firm-level data set from the Chinese automobile industry suggest that foreign investors face higher entry barriers and react stronger to past TFP levels. FDI is also found to improve future TFP more than other forms of investment. Finally, World Trade Organization (WTO) accession is found to reduce entry barriers for foreign and domestic private investors while increasing entry barriers for public investors.

Suggested Citation

  • Firat Demir & Li Su, 2016. "Total Factor Productivity, Foreign Direct Investment, and Entry Barriers in the Chinese Automotive Industry," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(2), pages 302-321, February.
    • Handle: RePEc:mes:emfitr:v:52:y:2016:i:2:p:302-321
    DOI: 10.1080/1540496X.2015.1011519
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    Cited by:

    1. Sarker, Bibhuti & Serieux, John, 2023. "Multilevel determinants of FDI: A regional comparative analysis," Economic Systems, Elsevier, vol. 47(3).
    2. Nizam, Ahmed Mehedi, 2023. "FDI, exchange rate and firm's gain in terms of real assets," MPRA Paper 119597, University Library of Munich, Germany.
    3. Law, Siong Hook & Kutan, Ali M. & Naseem, N.A.M., 2018. "The role of institutions in finance curse: Evidence from international data," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 174-191.
    4. Mansour Naser Alraja & Samir Hammami & Hazem Mohammed Al Samman, 2016. "Investment in Information and Communication Technology in Developing Countries: The Effect of Foreign Direct Investment: Evidences from Sultanate of Oman," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1632-1636.
    5. Naser Alraja, 2018. "The Effect of Foreign Direct Investment in Information and Communication Technology in Developing Countries -The Case of Sultanate of Oman," Post-Print hal-03455847, HAL.
    6. Matija Rojec & Mark Knell, 2018. "Why Is There A Lack Of Evidence On Knowledge Spillovers From Foreign Direct Investment?," Journal of Economic Surveys, Wiley Blackwell, vol. 32(3), pages 579-612, July.

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