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

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  • Kun Jiang
  • Wolfgang Keller
  • Larry D. Qiu
  • William Ridley

Abstract

We study the economics of international joint ventures with administrative data for China exploiting the change in foreign direct investment policy as China entered the WTO in the year 2002. Accounting for a quarter of all international joint ventures worldwide, we first show that foreign investors choose Chinese partners that are relatively large, productive, and often subsidized to set up their joint venture. Second, we document benefits from foreign technology in terms of innovation and productivity that go far beyond the joint venture, not only to the Chinese joint venture parent firm but also to entrepreneurs at firms upstream from and in the same industry as the joint venture (backward and horizontal spillovers, respectively). As China has dropped joint venture requirements and shifted towards wholly foreign-owned FDI as part of becoming a member of the WTO, there have been two opposing effects. While joint venture spillovers have increased, the shift towards wholly foreign-owned FDI has reduced spillovers because we find larger industry spillovers from international joint ventures than from wholly foreign-owned FDI. The results shed new light on the efficacy of FDI performance requirements as well as on claims regarding international technology transfer that underpin the current China-U.S. trade war.

Suggested Citation

  • Kun Jiang & Wolfgang Keller & Larry D. Qiu & William Ridley, 2018. "International Joint Ventures and Internal vs. External Technology Transfer: Evidence from China," NBER Working Papers 24455, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24455
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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. Federico S. Mandelman & Andrea L. Waddle, 2019. "Intellectual Property, Tariffs, and International Trade Dynamics," FRB Atlanta Working Paper 2019-10, Federal Reserve Bank of Atlanta.
    3. Assaf Razin, 2018. "High Tech and Venture Capital Inflows: The case of Israel," NBER Working Papers 25351, National Bureau of Economic Research, Inc.
    4. Farok J Contractor, 2019. "Can a firm find the balance between openness and secrecy? Towards a theory of an optimum level of disclosure," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(2), pages 261-274, March.
    5. Bircan, Çağatay, 2019. "Ownership Structure and Productivity of Multinationals," Journal of International Economics, Elsevier, vol. 116(C), pages 125-143.
    6. 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.
    7. Mandelman, Federico S. & Waddle, Andrea, 2020. "Intellectual property, tariffs, and international trade dynamics," Journal of Monetary Economics, Elsevier, vol. 109(C), pages 86-103.
    8. Hovhannisyan, Nune & Keller, Wolfgang, 2019. "International Business Travel and Technology Sourcing," CEPR Discussion Papers 13739, C.E.P.R. Discussion Papers.
    9. Sourafel Girma & Holger Görg & Erasmus Kersting, 2019. "Which boats are lifted by a foreign tide? Direct and indirect wage effects of foreign ownership," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(6), pages 923-947, August.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • 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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