FDI and market entry/exit: Evidence from China

Sajid Anwar and Sizhong Sun

Journal of Asian Economics, 2012, vol. 23, issue 5, 487-498

Abstract: This paper considers the impact of FDI and FDI-related spillovers on the entry and exit rates of domestic firms in mainland China's manufacturing sector. Since we suspect that aggregate results obscure differing effects based on the source of the FDI, we disaggregate FDI into that originating from Hong Kong, Macau and Taiwan (HMT) area and the rest of the world. The empirical analysis, based on 4-digit industry level panel data over the period 2003–2007, reveals that FDI originating from the rest of the world has made a significant contribution to the entry rate of domestic firms in China and the spillover effect arising from backward linkages is also positive and significant. However, FDI originating from HMT area has not encouraged domestic entry, whilst it has contributed to an increase in the exit rate of domestic firms.

Keywords: FDI; FDI-linked spillovers; Entry and exit of firms; China (search for similar items in EconPapers)
JEL-codes: D01 F23 L10 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:23:y:2012:i:5:p:487-498

DOI: 10.1016/j.asieco.2012.04.003

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