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FDI, trade, and spillover efficiency: evidence from China's manufacturing sector

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  • Yih-Chyi Chuang
  • Pi-Fum Hsu

Abstract

Using firm data from the 1995 Third Industrial Census of China, this paper finds that the presence of foreign ownership has a positive and significant effect on domestic firms' productivity. Moreover, trading with more advanced countries helps China gain access to new technology and information, which improves its productivity and enables it to compete in international markets. It is found that China's imports from OECD and the four Asian Tigers, and exports to OECD have positive effects on domestic firms' productivity. By dividing industries into high-technology-gap and low-technology-gap groups, it is found that the spillover effects of FDI are larger for the low-technology-gap group than for the high-technology-gap group. However, the estimation results of the trade-induced technology spillover effect support the technology-gap learning theory and the significance of importing appropriate technology.

Suggested Citation

  • Yih-Chyi Chuang & Pi-Fum Hsu, 2004. "FDI, trade, and spillover efficiency: evidence from China's manufacturing sector," Applied Economics, Taylor & Francis Journals, vol. 36(10), pages 1103-1115.
  • Handle: RePEc:taf:applec:v:36:y:2004:i:10:p:1103-1115
    DOI: 10.1080/0003684042000246812
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    References listed on IDEAS

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    1. Berthelemy, Jean-Claude & Demurger, Sylvie, 2000. "Foreign Direct Investment and Economic Growth: Theory and Application to China," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 140-155, June.
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    9. Yih-Chyi Chuang & Chi-Mei Lin, 1999. "Foreign direct investment, R&D and spillover efficiency: Evidence from Taiwan's manufacturing firms," Journal of Development Studies, Taylor & Francis Journals, vol. 35(4), pages 117-137.
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