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The role of foreign firms in domestic exporting


  • Sun, Sizhong


This paper investigates the impact of foreign firms on exports of domestic exporting firms. We show that domestic firms respond to an increase in the presence of foreign firms by increasing their exports, despite the increase in foreign presence can drive up the production cost and make domestic market more profitable. This hypothesis is then tested in China, where we find a 1 per cent increase in foreign presence causes domestic firms to increase their exports by 0.74 per cent. This finding sheds light on understanding China’s massive exports and fast inflow of foreign investment observed in the past three decades.

Suggested Citation

  • Sun, Sizhong, 2009. "The role of foreign firms in domestic exporting," MPRA Paper 18486, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:18486

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    More about this item


    Export; Foreign Firm; FDI; Spillovers; China;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F10 - International Economics - - Trade - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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