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Foreign Entry and Profitability of Domestic Firms: Evidence from China


  • Dahai Fu

    () (School of International Trade and Economics, Central University of Finance and Economics, Beijing)

  • Yanrui Wu

    () (UWA Business School, The University of Western Australia)


Profitability provides a yardstick for judging the operational efficiency, growth, and survival of a business enterprise. This study investigates the determinants of firm profitability in the Chinese manufacturing sector, with a focus on the impact of foreign entry on the profitability of domestic firms. Our findings show an inverted-U relationship between foreign entry and the profitability of domestic firms. Furthermore, we also find that the effect of foreign entry on domestic firm profitability varies according to the ownership structure of domestic firms and the export intensity of foreign newcomers. © 2013 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Dahai Fu & Yanrui Wu, 2013. "Foreign Entry and Profitability of Domestic Firms: Evidence from China," Asian Economic Papers, MIT Press, vol. 12(2), pages 34-60, Summer.
  • Handle: RePEc:tpr:asiaec:v:12:y:2013:i:2:p:34-60

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    Cited by:

    1. Fredrik Sjöholm & Nannan Lundin, 2013. "Foreign Firms and Indigenous Technology Development in the People's Republic of China," Asian Development Review, MIT Press, vol. 30(2), pages 49-75, September.

    More about this item


    profitability; foreign entry; manufacturing firms; China;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General


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