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Knowledge spillovers, absorptive capacity and total factor productivity in China’s manufacturing firms

  • Hailin Liao
  • Xiaohui Liu
  • Chengang Wang

Applying the stochastic frontier framework, this study explores the diffusion and absorption of technological knowledge in China’s manufacturing firms, based on a panel of more than 10,000 local and foreign-invested firms over the period 1998--2001. Our empirical approach allows us to distinguish between technological progress (TP) and technical efficiency (TE) in analysing whether R&D, exports and the presence of foreign direct investment simultaneously enhance TP through knowledge spillovers in a single framework and whether different types of domestic absorptive capacity moderate external knowledge spillovers in relation to TE. The results show that there are positive inter-industry productivity spillovers from R&D and foreign presence, whereas evidence of intra-industry productivity spillovers from FDI to Chinese firms is less robust. We find evidence that absorptive capacity is one of the key determinants to quantitatively explain intra-industry differences in productivity of local Chinese firms. The findings have important policy implications.

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File URL: http://hdl.handle.net/10.1080/02692171.2011.619970
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Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 26 (2012)
Issue (Month): 4 (August)
Pages: 533-547

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Handle: RePEc:taf:irapec:v:26:y:2012:i:4:p:533-547
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