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Is the Relationship between Inward FDI and Spillover Effects Linear? An Empirical Examination of the Case of China

In: Foreign Direct Investment, China and the World Economy

Author

Listed:
  • Peter J. Buckley

    (University of Leeds (CIBUL))

  • Jeremy Clegg

    (Leeds University Business School)

  • Chengqi Wang

    (Nottingham University Business School)

Abstract

This paper finds evidence for the coexistence within Chinese manufacturing industry of both curvilinear and linear relationships between inward foreign direct investment (FDI) and the productivity of locally owned enterprises (LOEs). This complexity of spillover effects challenges the laissez-faire view that all inward FDI into all types of domestic industry is equally valuable in terms of productivity spillover benefits. Our findings suggest that inward FDI into China leads either to spillovers that decline beyond a critical point, or to effects that continue linearly, depending on the ownership of foreign investors and the technological characteristics of the industry concerned. Our analysis yields original insights into the complex pattern of spillover effects from FDI into China, and deeper understanding of its possible causes.

Suggested Citation

  • Peter J. Buckley & Jeremy Clegg & Chengqi Wang, 2010. "Is the Relationship between Inward FDI and Spillover Effects Linear? An Empirical Examination of the Case of China," Palgrave Macmillan Books, in: Foreign Direct Investment, China and the World Economy, chapter 9, pages 192-215, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-24832-8_9
    DOI: 10.1057/9780230248328_9
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    Citations

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    Cited by:

    1. Jim Huangnan Shen & Hao Wang & Steve Chu‐Chia Lin, 2021. "Productivity Gap and Inward FDI Spillovers: Theory and Evidence from China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(2), pages 24-48, March.
    2. Tatiana Vitalievna Pogodina & Vera Grigoryevna Aleksakhina & Vladimir Arsenjevich Burenin & Тatiana Nicolaevna Polianova & Lenar Albertovich Yunusov, 2019. "Towards the innovation-focused industry development in a climate of digitalization: the case of Russia," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 6(4), pages 1897-1906, June.
    3. Ning, Lutao & Guo, Rui & Chen, Kaihua, 2023. "Does FDI bring knowledge externalities for host country firms to develop complex technologies? The catalytic role of overseas returnee clustering structures," Research Policy, Elsevier, vol. 52(6).
    4. Seema Singha & Soma Roy Dey Choudhury & Brajesh Kumar, 2022. "Foreign direct investments and spillover effect on entrepreneurial activities in India: an empirical study," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 12(1), pages 423-439, December.
    5. Chenjian Zhang, 2022. "Formal and informal institutional legacies and inward foreign direct investment into firms: Evidence from China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(6), pages 1228-1256, August.
    6. Francisco Puig & Borja Portero & Miguel González-Loureiro, 2017. "Clustering strategy and development of subsidiaries in China," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(2), pages 221-243, June.
    7. Joshua Akinlolu Olayinka & Sirinuch Loykulnanta, 2019. "How Domestic Firms Benefit from the Presence of Multinational Enterprises: Evidence from Indonesia and Philippines," Economies, MDPI, vol. 7(3), pages 1-14, September.
    8. Tatiana Vitalievna Pogodina & Tatiana Viktorovna Muzhzhavleva & Natalya Leonidovna Udaltsova, 2020. "Strategic management of the competitiveness of industrial companies in an unstable economy," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(3), pages 1555-1564, March.
    9. Idode Patrick & Sanusi Gbenga, 2019. "Financial Globalisation and Economic Transformation in Africa: Evidence from Nigeria," Financial Sciences. Nauki o Finansach, Sciendo, vol. 24(1), pages 7-24, March.
    10. Juan Carlos Leiva & Juan Antonio Rodríguez Álvarez & Ricardo Monge González, 2017. "Effects of hiring former employees of multinationals in the absorptive capacity of local firms," Contaduría y Administración, Accounting and Management, vol. 62(2), pages 36-37, Abril-Jun.
    11. Rui Guo & Lutao Ning & Kaihua Chen, 2022. "How do human capital and R&D structure facilitate FDI knowledge spillovers to local firm innovation? a panel threshold approach," The Journal of Technology Transfer, Springer, vol. 47(6), pages 1921-1947, December.

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