Measuring the technological leadership of international joint ventures in a transforming economy

Technical efficiency is introduced as an objective criterion for measuring the performance of international joint ventures in China. By using the technique of stochastic production frontier, we compute the estimates of time-invariant and time-varying technical efficiency in four major manufacturing industries in Shanghai. We show that international joint ventures are in general more technically efficient than domestic firms. In addition, the efficiency gaps between the international joint ventures and domestic firms in the industries of textile, machinery and equipment, and electronics and telecommunications equipment are widening in our sample period although the industrial reforms and active technology policies have improved the productivity of domestic firms. However, in the clothing industry, the technical efficiency of domestic firms, especially state-owned firms, is comparable to the efficiency leader, international joint ventures. These results are useful to assess the competitive advantages of international joint ventures in the People's Republic of China.