Who leads and who follows? The cross-border peer effect in investment by Chinese and US firms

Warren B. Bailey, Xiaping Cao, Zhenyi Yang and Sili Zhou

Journal of International Economics, 2024, vol. 147, issue C

Abstract: We document a cross-border peer effect in corporate investment across two key economies, China and the US. Results show that investment by individual Chinese firms lags US peers without feedback in the other direction. This association is stronger for Chinese firms in manufacturing, with innovative US peers, once China joined WTO, or targeted by anti-dumping investigations or measures as reported to the WTO. These findings are robust to diagnostic tests and alternative specifications. Furthermore, Chinese firms respond to domestic competition by learning from US peers. Our findings illustrate how peer competition induced by foreign trade and international institutions affects corporate decision-making in China’s rapidly-growing economy.

Keywords: Peer effect; US; China; Investment; WTO (search for similar items in EconPapers)
JEL-codes: D81 E22 F65 G31 G32 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:147:y:2024:i:c:s0022199623001617

DOI: 10.1016/j.jinteco.2023.103875

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