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International Joint Ventures and Internal versus External Technology Transfer: Evidence from China

Author

Listed:
  • Jiang, Kun
  • Keller, Wolfgang
  • Qiu, Larry
  • Ridley, William

Abstract

This paper studies international joint ventures, where foreign direct investment is performed by a foreign and a domestic firm that together set up a new firm, the joint venture. Employing administrative data on all international joint ventures in China from 1998 to 2007-roughly a quarter of all international joint ventures in the world-we find, first, that Chinese firms chosen to be partners of foreign investors tend to be larger, more productive, and more likely subsidized than other Chinese firms. Second, there is substantial technology transfer both to the joint venture and to the Chinese joint venture partner, an external, intergenerational technology transfer effect that this paper introduces. Third, with technology spillovers typically outweighing negative competition effects, joint ventures generate on net positive externalities to other Chinese firms in the same industry. Joint venture externalities are large, perhaps twice the size of wholly-owned FDI spillovers, and it is R&D-intensive firms, including the joint ventures themselves, that benefit most from these externalities. Furthermore, the positive external joint venture effect is larger if the foreign firm is from the U.S. rather than from Japan or Hong Kong, Macau, and Taiwan, while this effect is virtually absent in broad sectors that include economic activities for which China's FDI policy has prohibited joint ventures.

Suggested Citation

  • Jiang, Kun & Keller, Wolfgang & Qiu, Larry & Ridley, William, 2018. "International Joint Ventures and Internal versus External Technology Transfer: Evidence from China," CEPR Discussion Papers 12809, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12809
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    References listed on IDEAS

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    Cited by:

    1. K. Buysse & D. Essers, 2019. "Cheating tiger, tech-savvy dragon : Are Western concerns about “unfair trade” and “Made in China 2025” justified ?," Economic Review, National Bank of Belgium, issue ii, pages 47-70, September.
    2. Assaf Razin, 2018. "High Tech and Venture Capital Inflows: The case of Israel," NBER Working Papers 25351, National Bureau of Economic Research, Inc.
    3. Bircan, Çağatay, 2019. "Ownership Structure and Productivity of Multinationals," Journal of International Economics, Elsevier, vol. 116(C), pages 125-143.
    4. Bown, Chad P., 2019. "The 2018 US-China Trade Conflict After 40 Years of Special Protection," CEPR Discussion Papers 13695, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    competition effects; Foreign direct investment; international joint ventures; partner selection; technology spillovers;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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