Do Chinese domestic firms benefit from FDI inflow? Evidence of horizontal and vertical spillovers

Ping LIN; Zhuomin LIU; Yifan ZHANG

doi:10.1016/j.chieco.2009.05.010

Do Chinese domestic firms benefit from FDI inflow? Evidence of horizontal and vertical spillovers

Ping LIN, Zhuomin LIU, Yifan ZHANG

Department of Economics

Research output: Journal Publications › Journal Article (refereed) › peer-review

156 Citations (Scopus)

Abstract

Using a large panel dataset covering all manufacturing firms (above a minimum Scale) in China from 1998 to 2005, this paper examines whether there exist productivity spillovers from foreign direct investment (FDI) to domestic firms. In estimating productivity, we control for a Possible simultaneity bias by using semi-parametric estimation techniques. We find that Hong Kong, Macao and Taiwan (HMT) invested fit ins generate negative horizontal spillovers, while Non-HMT foreign invested firms (mostly from OECD countries) tend to bring positive horizontal spillovers in China. These two opposing horizontal effects seem to cancel out at the aggregate level. We also find strong and robust vertical spillover effects oil both state-owned firms and non-state firms. However, vertical spillover effects from export-oriented FDI are weaker than those from domestic-market-oriented FDI.

Original language	English
Pages (from-to)	677-691
Number of pages	15
Journal	China Economic Review
Volume	20
Issue number	4
DOIs	https://doi.org/10.1016/j.chieco.2009.05.010
Publication status	Published - Dec 2009

Bibliographical note

We would like to thank co-editor Jeffrey Zax and an anonymous referee for their useful suggestions which improved the quality of the paper substantially. We would also like to thank Daniel Berkowitz, Loren Brandt, K. Y. Cheung, Deborah Davis, Simon Fan, Ying Fang, Lok-Sang Ho, Chang-Tai Hsieh, Yasheng Huang, W. L. Lai, Thomas Rawski, Christopher Udry, Thomas Voon, and Xiangdong Wei, and seminar participants at Lingnan University, University of Pittsburgh and Yale University for their helpful comments and discussions. Financial support from Lingnan University is acknowledged (Funding # DR07B4).

Keywords

China
Foreign direct investment
Spillovers

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.chieco.2009.05.010

https://commons.ln.edu.hk/cgi/viewcontent.cgi?article=3522&context=sw_master

Cite this

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abstract = "Using a large panel dataset covering all manufacturing firms (above a minimum Scale) in China from 1998 to 2005, this paper examines whether there exist productivity spillovers from foreign direct investment (FDI) to domestic firms. In estimating productivity, we control for a Possible simultaneity bias by using semi-parametric estimation techniques. We find that Hong Kong, Macao and Taiwan (HMT) invested fit ins generate negative horizontal spillovers, while Non-HMT foreign invested firms (mostly from OECD countries) tend to bring positive horizontal spillovers in China. These two opposing horizontal effects seem to cancel out at the aggregate level. We also find strong and robust vertical spillover effects oil both state-owned firms and non-state firms. However, vertical spillover effects from export-oriented FDI are weaker than those from domestic-market-oriented FDI.",

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author = "Ping LIN and Zhuomin LIU and Yifan ZHANG",

note = "We would like to thank co-editor Jeffrey Zax and an anonymous referee for their useful suggestions which improved the quality of the paper substantially. We would also like to thank Daniel Berkowitz, Loren Brandt, K. Y. Cheung, Deborah Davis, Simon Fan, Ying Fang, Lok-Sang Ho, Chang-Tai Hsieh, Yasheng Huang, W. L. Lai, Thomas Rawski, Christopher Udry, Thomas Voon, and Xiangdong Wei, and seminar participants at Lingnan University, University of Pittsburgh and Yale University for their helpful comments and discussions. Financial support from Lingnan University is acknowledged (Funding # DR07B4).",

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doi = "10.1016/j.chieco.2009.05.010",

language = "English",

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pages = "677--691",

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AU - LIN, Ping

AU - LIU, Zhuomin

AU - ZHANG, Yifan

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N2 - Using a large panel dataset covering all manufacturing firms (above a minimum Scale) in China from 1998 to 2005, this paper examines whether there exist productivity spillovers from foreign direct investment (FDI) to domestic firms. In estimating productivity, we control for a Possible simultaneity bias by using semi-parametric estimation techniques. We find that Hong Kong, Macao and Taiwan (HMT) invested fit ins generate negative horizontal spillovers, while Non-HMT foreign invested firms (mostly from OECD countries) tend to bring positive horizontal spillovers in China. These two opposing horizontal effects seem to cancel out at the aggregate level. We also find strong and robust vertical spillover effects oil both state-owned firms and non-state firms. However, vertical spillover effects from export-oriented FDI are weaker than those from domestic-market-oriented FDI.

AB - Using a large panel dataset covering all manufacturing firms (above a minimum Scale) in China from 1998 to 2005, this paper examines whether there exist productivity spillovers from foreign direct investment (FDI) to domestic firms. In estimating productivity, we control for a Possible simultaneity bias by using semi-parametric estimation techniques. We find that Hong Kong, Macao and Taiwan (HMT) invested fit ins generate negative horizontal spillovers, while Non-HMT foreign invested firms (mostly from OECD countries) tend to bring positive horizontal spillovers in China. These two opposing horizontal effects seem to cancel out at the aggregate level. We also find strong and robust vertical spillover effects oil both state-owned firms and non-state firms. However, vertical spillover effects from export-oriented FDI are weaker than those from domestic-market-oriented FDI.

KW - China

KW - Foreign direct investment

KW - Spillovers

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DO - 10.1016/j.chieco.2009.05.010

M3 - Journal Article (refereed)

SN - 1043-951X

VL - 20

SP - 677

EP - 691

JO - China Economic Review

JF - China Economic Review

IS - 4

ER -

Do Chinese domestic firms benefit from FDI inflow? Evidence of horizontal and vertical spillovers

Abstract

Bibliographical note

Keywords

UN SDGs

Access to Document

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