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The level of human capital in innovative firms located in China. Is foreign capital relevant?

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  • Aurora Teixeira
  • Li Shu

Abstract

Studies on the impact of foreign direct investment (FDI) on the Chinese economy have essentially focused on the relationship between FDI, productivity and economic growth, revealing a tendency toward sectoral, regional and macroeconomic empirical studies. This work aims to complement these approaches and contribute to the rather limited literature on the relationship between FDI, Human Capital and Innovation at a corporate level. Based on a set of large and innovative firms (national and foreign capital) located in China, we have concluded that (1) the direct impact of foreign capital on the level of human capital in firms is negative, that is no evidence was found suggesting that FDI has a positive influence on their human capital and (ii) in indirect terms, by means of investment in R&D (research and development) activities, FDI has a positive impact on general human capital (i.e. formal education). These results suggest that for China to benefit from FDI, it is necessary to implement a selective policy to attract FDI, taking into account more technologically advanced, R&D-based projects.

Suggested Citation

  • Aurora Teixeira & Li Shu, 2012. "The level of human capital in innovative firms located in China. Is foreign capital relevant?," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 17(2), pages 343-360.
    • Handle: RePEc:taf:rjapxx:v:17:y:2012:i:2:p:343-360
    DOI: 10.1080/13547860.2012.668095
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    1. Teixeira, Aurora A.C. & Tavares-Lehmann, Ana Teresa, 2014. "Human capital intensity in technology-based firms located in Portugal: Does foreign ownership matter?," Research Policy, Elsevier, vol. 43(4), pages 737-748.
    2. Evgeniia Kuminova & Anna Bykova, 2014. "Did relational capital matter during the financial crisis?," International Journal of Learning and Intellectual Capital, Inderscience Enterprises Ltd, vol. 11(4), pages 286-305.

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    More about this item

    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
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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