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Do Multinationals' R&D Activities Stimulate Indigenous Entrepreneurship? Evidence from China's "Silicon Valley"

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  • Hongbin Cai
  • Yasuyuki Todo
  • Li-An Zhou

Abstract

Using a unique firm-level dataset from China's "Silicon Valley," we investigate how multinational enterprises (MNEs) affect local entrepreneurship and R&D activities upon entry. We find that R&D activities of MNEs in an industry stimulate entry of domestic firms into the same industry and enhance R&D activities of newly entering domestic firms. By contrast, MNEs' production activities or domestic firms' R&D activities do not have such effect. Since MNEs are technologically more advanced than domestic firms, our findings suggest that diffusion of MNEs' advanced knowledge to potential indigenous entrepreneurs through MNEs' R&D stimulates entry of domestic firms.

Suggested Citation

  • Hongbin Cai & Yasuyuki Todo & Li-An Zhou, 2007. "Do Multinationals' R&D Activities Stimulate Indigenous Entrepreneurship? Evidence from China's "Silicon Valley"," NBER Working Papers 13618, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13618
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    References listed on IDEAS

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    2. Koen De Backer & Leo Sleuwaegen, 2003. "Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(1), pages 67-84, February.
    3. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
    4. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    5. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2004. "Entry and Productivity Growth: Evidence from Microlevel Panel Data," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 265-276, 04/05.
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    7. Ashish Arora & Alfonso Gambardella, 2005. "The Globalization of the Software Industry: Perspectives and Opportunities for Developed and Developing Countries," NBER Chapters,in: Innovation Policy and the Economy, Volume 5, pages 1-32 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Filatotchev, Igor & Liu, Xiaohui & Lu, Jiangyong & Wright, Mike, 2011. "Knowledge spillovers through human mobility across national borders: Evidence from Zhongguancun Science Park in China," Research Policy, Elsevier, vol. 40(3), pages 453-462, April.
    2. Zhang, Ying & Duysters, Geert, 2010. "Entrepreneurship Development and the Role of Economic Transition in Entrepreneurial Activities in China," MERIT Working Papers 036, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. repec:bla:worlde:v:40:y:2017:i:11:p:2354-2377 is not listed on IDEAS
    4. Zheng, Jianghuai & Gao, Yanyan & Hu, Xiaowen, 2008. "企业“扎堆”、技术升级与经济绩效 ——对中国开发区产业集聚的性质及其变迁的实证分析
      [Firm Concentration, Technology Promotion and Economic Performance: An Empirical Study on the Nature and Dynamics of Industrial Clusters in China’s Develop
      ," MPRA Paper 8917, University Library of Munich, Germany.
    5. Zheng, Jianghuai & Gao, Yanyan, 2009. "The nature of economic development zones in China:an empirical study based on data from the Yangtze River Delta," MPRA Paper 33141, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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