How do Multinational Firms Impact China’s Technology? The Role of Quid Pro Quo Policy and Technology Spillovers

Xiao Ma and Yiran Zhang

MPRA Paper from University Library of Munich, Germany

Abstract: Multinationals play a crucial role in international knowledge diffusion. Given the recent concern that multinationals are departing China, understanding the importance of multinationals for China's technology is also particularly policy-relevant. Using comprehensive patent data from China, we document: (1) multinational affiliates and their foreign parent firms comprise a significant portion of patents filed with China’s patent office; and (2) there are subsequent transfers and spillovers of these technologies to domestic firms. Guided by the empirical findings, we develop a quantitative framework of multinational activities featuring cross-country technology flows, transfers, and spillovers. Quantitatively, we find that without multinational production and knowledge spillovers, China's total technology capital would drop by 36%. Furthermore, due to the externalities of multinationals’ technology investments, subsidizing multinationals in China will be socially beneficial, and reduced knowledge transfers/spillovers largely amplify the negative effects of multinationals' departing China on both China's GDP and technology.

Keywords: multinational activities; technology transfers; knowledge spillovers (search for similar items in EconPapers)
JEL-codes: F23 O33 (search for similar items in EconPapers)
Date: 2023-12-05
New Economics Papers: this item is included in nep-cna, nep-cse, nep-int, nep-knm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:119371

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