Productivity Spillovers from FDI in China: Regional Differences and Threshold Effects

Economic theory posits numerous channels through which FDI might create positive spillovers for domestic firms. However, the results of empirical studies that have sought to document these spillovers have been mixed. One explanation for this variation is that the capacity of domestic firms to absorb spillovers might vary. In the present paper, we explore these issues in the case of China. Aside from being one of the world's leading hosts of foreign direct investment, China makes for an interesting case study because its provinces vary greatly with respect to those factors most commonly held to influence absorptive capacity, such as the initial level of technology in domestic firms. This paper begins by empirically establishing that the spillovers from foreign direct investment do indeed vary across provinces. Threshold values for various factors that influence absorptive capacity factors are then estimated and it is found that conditions in many provinces presently fall short of these values. This provides an obvious focus of attention for China's policy-makers.

[1]  Ari Kokko,et al.  Host country competition, labor skills, and technology transfer by multinationals , 1994 .

[2]  Yih-Chyi Chuang *,et al.  FDI, trade, and spillover efficiency: evidence from China's manufacturing sector , 2004 .

[3]  Chengqi Wang,et al.  Do spillover benefits grow with rising foreign direct investment? An empirical examination of the case of China , 2007 .

[4]  Zhiqiang Liu.  Foreign Direct Investment and Technology Spillovers: Theory and Evidence , 2008 .

[5]  Unias Li,et al.  Has China Crowded Out Foreign Direct Investment from its Developing East Asian Neighbors? , 2007 .

[6]  Yanrui Wu.  Measuring the performance of foreign direct investment: a case study of China , 2000 .

[7]  S. Girma,et al.  Putting people first? Chinese state-owned enterprises adjustment to globalisation , 2008 .

[8]  G. Hale,et al.  Federal Reserve Bank of San Francisco Working Paper Series Are There Productivity Spillovers from Foreign Direct Investment in China? Are There Productivity Spillovers from Foreign Direct Investment in China? , 2022 .

[9]  J. Konings,et al.  Evidence of Firm Heterogeneity: FDI Spillovers in the Chinese Manufacturing Sector , 2010 .

[10]  S. Girma,et al.  FDI, Linkages and the Efficiency of State-Owned Enterprises in China , 2008 .

[11]  G. Jefferson,et al.  R&D and Technology Transfer: Firm-Level Evidence from Chinese Industry , 2003, Review of Economics and Statistics.

[12]  S. Tong,et al.  Do Domestic Firms Benefit from Foreign Direct Investment ? , 2003 .

[13]  Guangzhong Li,et al.  How does FDI affect China? Evidence from industries and provinces , 2007 .

[14]  P. Lin,et al.  Spillover Effects of FDI on Innovation in China: Evidence from the Provincial Data , 2003 .

[15]  R. Smeets.  Collecting the Pieces of the FDI Knowledge Spillovers Puzzle , 2008 .

[16]  Albert G Z Hu,et al.  FDI Impact and Spillover: Evidence from China's Electronic and Textile Industries , 2002 .

[17]  Shuijun Peng,et al.  Technology spillovers, absorptive capacity and economic growth , 2006 .

[18]  Chengqi Wang,et al.  Horizontal and vertical spillover effects of foreign direct investment in Chinese manufacturing , 2008 .

[19]  G. Hale,et al.  What Determines Technological Spillovers of Foreign Direct Investment: Evidence from China , 2006 .

[20]  Ziliang Deng,et al.  Productivity Spillover of Foreign Direct Investment: A Computable General Equilibrium Model of China , 2008 .

[21]  Foreign Direct Investment and Productivity , 2009 .

[22]  D. Greenaway,et al.  Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment? , 2003, SSRN Electronic Journal.