Foreign Firms and Indigenous Technology Development in the People's Republic of China

Fredrik Sjöholm and Nannan Lundin
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Nannan Lundin: Managing Director at Tekfors Ltd.

Asian Development Review, 2013, vol. 30, issue 2, 49-75

Abstract: The People's Republic of China (PRC) is currently promoting indigenous technology development through support of Chinese firms and, arguably, by restricting operations of foreign multinational firms. This policy seems to overlook the impact of foreign firms on technology development in local firms. For instance, technology might leak out to local firms though spillovers. Moreover, competition from foreign firms might force local firms to engage in technology development. We examine the impact of foreign direct investment (FDI) on technology development in the PRC. We start by surveying a large and growing literature on FDI and spillovers in the country. Most previous studies find evidence of positive spillovers. We then continue to examine the effect of FDI on competition in the Chinese manufacturing sector and the effect of competition on firms’ research and development (R&D). Our analysis is conducted on a large dataset including all large- and medium-sized Chinese firms over the period 1998–2004. Our results show that FDI increases competition but there are no strong indications of competition affecting investments in R&D. © 2013 Asian Development Bank and Asian Development Bank Institute.

Keywords: People’s Republic of China; FDI; spillovers; technology; R&D (search for similar items in EconPapers)
JEL-codes: F23 L11 O31 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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