FDI deregulation and firm innovation: Evidence from firm patents

Yunshu Gao, Sisi Yin, Ben Ferrett and Bo Gao

China Economic Review, 2024, vol. 83, issue C

Abstract: This paper studies whether inward FDI deregulation promotes innovation by firms in the host country. A theoretical framework, in which the entry of additional foreign firms is associated with both spillover and competition effects, is built to guide the empirical evaluation. Exploiting data on Chinese firm-level patents in a difference-in-differences setting, this paper finds a positive and significant impact of FDI deregulation on firm innovation. Moreover, we find that FDI deregulation had a heterogeneous effect on firms: the impact was prominent on firms with high productivity while being insignificant on firms with low productivity.

Keywords: Firm innovation; FDI deregulation; Firm heterogeneity; Vertical linkages (search for similar items in EconPapers)
JEL-codes: F12 F13 F14 O12 O31 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:83:y:2024:i:c:s1043951x23001451

DOI: 10.1016/j.chieco.2023.102060

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