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

Ping LIN, Zhuomin LIU, Yifan ZHANG

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

79 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 languageEnglish
Pages (from-to)677-691
Number of pages15
JournalChina Economic Review
Volume20
Issue number4
DOIs
Publication statusPublished - 1 Dec 2009

Fingerprint

Spillover
Foreign direct investment
Domestic firms
Spillover effects
Macao
Taiwan
Hong Kong
China
Semiparametric estimation
Productivity spillovers
Domestic market
Productivity
OECD countries
Manufacturing firms
Simultaneity bias
Oil

Keywords

  • China
  • Foreign direct investment
  • Spillovers

Cite this

@article{2b5f6b15001244e0813fc2018f9ead6e,
title = "Do Chinese domestic firms benefit from FDI inflow? Evidence of horizontal and vertical spillovers",
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.",
keywords = "China, Foreign direct investment, Spillovers",
author = "Ping LIN and Zhuomin LIU and Yifan ZHANG",
year = "2009",
month = "12",
day = "1",
doi = "10.1016/j.chieco.2009.05.010",
language = "English",
volume = "20",
pages = "677--691",
journal = "China Economic Review",
issn = "1043-951X",
publisher = "Elsevier",
number = "4",

}

Do Chinese domestic firms benefit from FDI inflow? Evidence of horizontal and vertical spillovers. / LIN, Ping; LIU, Zhuomin; ZHANG, Yifan.

In: China Economic Review, Vol. 20, No. 4, 01.12.2009, p. 677-691.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

TY - JOUR

T1 - Do Chinese domestic firms benefit from FDI inflow? Evidence of horizontal and vertical spillovers

AU - LIN, Ping

AU - LIU, Zhuomin

AU - ZHANG, Yifan

PY - 2009/12/1

Y1 - 2009/12/1

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

UR - http://commons.ln.edu.hk/sw_master/2521

U2 - 10.1016/j.chieco.2009.05.010

DO - 10.1016/j.chieco.2009.05.010

M3 - Journal Article (refereed)

VL - 20

SP - 677

EP - 691

JO - China Economic Review

JF - China Economic Review

SN - 1043-951X

IS - 4

ER -