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

Ping Lin, Zhuomin Liu and Yifan Zhang

China Economic Review, 2009, vol. 20, issue 4, 677-691

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 firms 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 on 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: Foreign; direct; investment; Spillovers; China (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (117)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:20:y:2009:i:4:p:677-691

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