How Do Chinese Industries Benefit from FDI Spillovers?

Banri Ito, Naomitsu Yashiro, Zhaoyuan Xu, Xiaohong Chen and Ryuhei Wakasugi ()

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Recently, Foreign Invested Enterprises (FIEs) in China have increased their investment in not only production activity but also R&D activity. This paper examines the impact of spillovers from such activities on two types of innovations by Chinese domestic firms: Total Factor Productivity (TFP) and invention patent application, using comprehensive industry and province-level data. We evaluate such spillovers according to FIEs' ownership structure, the origin of foreign funds, and the type of their activity: R&D, and production. We find an interesting asymmetry between spillovers to TFP and patent application: while we do not find significant intra-industry spillovers from FIEs, which is in line with previous studies, we find robust inter-industries spillover on TFP. On the other hand, we find substantial intra-industry spillovers promoting invention patent application but no evidence of inter-industries spillovers. Furthermore, whereas spillovers from FIEs to Chinese firms' TFP stem from their production activities, the source of spillovers to invention patent application is mostly through their R&D activity. Our findings indicate a need for multi-dimensional evaluation on the role of FDI in developing countries.

Pages: 34 pages
Date: 2010-05
New Economics Papers: this item is included in nep-cse, nep-dev, nep-ino, nep-int, nep-ipr, nep-pr~ and nep-tra
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Journal Article: How do Chinese industries benefit from FDI spillovers? (2012)
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