THE IMPACT OF EXPORTING AND FOREIGN DIRECT INVESTMENT ON PRODUCT INNOVATION: EVIDENCE FROM CHINESE MANUFACTURERS

To understand the drivers of product innovation at the firm level, I compare the effects of foreign direct investment (FDI) and exporting on product innovation using a rich firm‐level database of manufacturing and industrial enterprises. The article focuses on product innovation, as it is vital to economic development. Estimates from linear regressions and propensity score matching tests show that learning‐by‐exporting is a stronger predictor of product innovation. Firms that receive foreign investment also tend to engage in more product innovation, but not at the same level as the firms that export. Additional tests confirm that as they start and stop exporting, firms change their patterns of investment in the drivers of product innovation—fixed capital and research. (JEL D22, F14, F23, L25, O31)     

INTERNATIONALIZATION STRATEGIES IN OLIGOPOLY WITH HETEROGENEOUS FIRMS

This paper examines the foreign direct investment (FDI) versus exports decision of foreign oligopolistic firms under cost heterogeneity. An additional motivation for firms to invest abroad is the technological sourcing via spillovers, which flow from the host more efficient firm to foreign less advantaged firms. For intermediate values of the set‐up costs associated with FDI entry, it is shown that foreign firms choose opposite entry strategies. An equilibrium where the less efficient foreign firm exports whereas the more efficient invests is more likely to happen when foreign firms become more heterogeneous, the larger the trade costs and not too big oligopolistic profitability. Interestingly, the opposite may also be an equilibrium thus finding that the more efficient firm does not choose to invest, a result that emphasizes the relevance of the strategic setting under consideration. The latter result identifies a market failure since welfare in the host market is higher when both firms undertake FDI; a finding that calls attention to how appropriate are host government policies towards internationalization strategies.     

Market access and technology adoption in the presence of FDI

This paper theoretically investigates whether improved access to the domestic market speeds up new technology adoption by foreign firms. Foreign firms choose between exporting and foreign direct investment (FDI) to serve the domestic market. If two firms compete in the domestic market, multilateral liberalization of FDI or the realization of multilateral free trade may deter or delay technology adoption, while they always promote and accelerate technology adoption if only a single firm serves the domestic market. Technology adoption can be quickest and consumer welfare greatest when the fixed cost of FDI and the trade costs are neither very high nor very low. Preferential liberalization of FDI promotes the technology adoption of the targeted firm but may not benefit consumers because it discourages technology adoption of the non-targeted firm.     

TARIFF JUMPING FOREIGN DIRECT INVESTMENT DECISION IN A QUALITY‐DIFFERENTIATED MARKET

Using a product differentiation model, this paper discusses the issue of transnational firms evading tariffs and investing directly in a host country (through foreign direct investment (FDI)). Where product quality is differentiated between foreign and host country firms and assuming a firm's quality requirement is a long‐term strategy and is not affected by a foreign firm's trade decision, we obtain the following findings. First, whether or not a host country firm produces high or low quality products, raising the quality requirement for foreign products will increase the possibility of a foreign firm choosing FDI instead of exporting a product to the host country. Second, raising the quality requirement for domestic products will lower the possibility of foreign firms choosing FDI without regard to the product's quality. Finally, given a competitor in the host country, in FDI, a foreign high‐quality product‐producing firm has an advantage over a low‐quality product‐producing firm. We also find that even when firms' quality decisions are affected by a foreign firm's trade decision, most of the above results will still hold.     

FDI对中国经济发展影响的实证分析与政策建议

FDI对中国经济发展的影响主要表现为:(1)外商投资企业劳动力的就业增量对于经济增长的负效应要小于其他类型企业的就业增量对经济增长的负效应;(2)FDI规模扩大对就业具有直接的创造效应,但对其他类型企业的就业具有一定的负面效应;(3)外商投资企业的出口与世界经济增长和我国的经济增长具有很强的相关性,但与FDI只有较弱的相关性;(4)FDI对于内资企业模仿和学习先进技术具有明显的溢出效应,但对内资企业自主创新能力的提高的溢出效应不大。     

对中国国际贸易与FDI相互关系的重新检验

This paper studies the long-term relationship between FDI and imports and exports through evidence from China by using cointegration technology, and the Granger causality test shows that FDI had an obvious effect on imports and exports activities of foreign firms, and in the meantime, the imports and exports of foreign firms greatly promoted FDI. However, there is not a stable equilibrium between FDI and international trade in the long run for all firms in China. This paper provides some explanations for the possible reasons that cause the above difference in estimation results from the perspectives of both location and industry factors.      

TRADE,STRUCTURAL REFORM,AND INSTITUTIONS IN SUB‐SAHARAN AFRICA

Sub‐Saharan African countries have traditionally lagged the rest of the developing world in terms of overall trade relative to gross domestic product. But, there is growing interest among these countries to initiate trade policies and improve quality of institutions as a way to promote trade and boost foreign direct investment. This article extends the gravity model of trade to include proxies for trade reform policy and institutional quality among the 15 countries of the Economic Community of West African States (ECOWAS) for data spanning 1984–2006. Alternative methods of estimation based on ordinary least squares, Heckman two‐step procedure, and Poisson pseudo‐maximum likelihood produce predictions that are consistent with the standard gravity model. They further highlight the evidence of restrictive trade policies and weak institutions that contribute to the failure of ECOWAS countries to boost bilateral trade. (JEL F13, F15, O19, O55)     

Export Spillovers of FDI on China's Domestic Firms

This paper examines the horizontal and vertical export spillovers of foreign direct investment (FDI) on China's manufacturing domestic firms by using firm‐level census data over the period of 2000–03. Based on a Heckman two‐step procedure combining first differencing and instrumental variable regression techniques, it is found that FDI has had a positive impact on the export value of domestic firms mainly through backward technology spillovers and a positive impact on the export‐to‐sales ratio of domestic firms through horizontal export‐related information spillovers. After decomposing FDI by different market orientation and domestic firms by different ownership, the paper finds that the positive impact on domestic firms' export values is mainly from the nonexporting and the exporting foreign‐invested enterprises while the positive impact on domestic firms' export‐to‐sales ratios is mainly from the high‐exporting foreign‐invested enterprises. Both types of export spillovers are mainly diffused to domestic non‐state‐owned enterprises.     

环境立法管制对企业出口国内附加值率的影响*

本文通过理论建模和经验数据研究了环境立法管制与中国企业出口国内附加值率之间的关系。结果发现，环境立法管制有助于提升中国企业出口国内附加值率。机制分析证明：一方面，加强环境立法管制的“成本效应”促使直接受约束的企业寻找其他可替代要素。这种替代效应的大小取决于企业对污染型资源的依赖程度。“创新效应”通过改变企业生产效率影响企业成本加成。这两种效应均影响了出口国内附加值率。另一方面，环境立法管制提高了本国企业出口到国外市场的生产率下界，使间接受约束的企业改变定价策略，进而影响出口国内附加值率。本文研究表明，地区严格的执法力度有助于扩大环境立法管制对污染型资源依赖程度较低企业出口国内附加值率的积极影响。     

环境立法管制对企业出口国内附加值率的影响*

本文通过理论建模和经验数据研究了环境立法管制与中国企业出口国内附加值率之间的关系。结果发现,环境立法管制有助于提升中国企业出口国内附加值率。机制分析证明：一方面,加强环境立法管制的“成本效应”促使直接受约束的企业寻找其他可替代要素。这种替代效应的大小取决于企业对污染型资源的依赖程度。“创新效应”通过改变企业生产效率影响企业成本加成。这两种效应均影响了出口国内附加值率。另一方面,环境立法管制提高了本国企业出口到国外市场的生产率下界,使间接受约束的企业改变定价策略,进而影响出口国内附加值率。本文研究表明,地区严格的执法力度有助于扩大环境立法管制对污染型资源依赖程度较低企业出口国内附加值率的积极影响。     

Export sophistication and economic growth: Evidence from China

We consider the effect of export sophistication on economic performance by appealing to regional variation within one single country (China) over the 1997-2009 period. We find evidence in support of Hausmann, Hwang and Rodrik (2007), in that regions specializing in more sophisticated goods subsequently grow faster. We find substantial variation in export sophistication at the province and prefecture level, controlling for the level of development, and that this sophistication in turn drives growth. Our results suggest that these gains are limited to the ordinary export activities undertaken by domestic firms: no direct gains result from either processing trade activities or foreign firms, even though these are the main contributors to the global upgrading of China's exports. As such, the extent of assembly trade and foreign entities should be distinguished in order to measure the true movement in a country's technology and the contribution of exports to economic growth.     

Domestic R&D,Foreign Direct Investment and Welfare

This paper provides a new rationale to examine the two‐way relationship between domestic research and development (R&D) and foreign direct investment (FDI), as well as their impacts on domestic welfare. Our analysis is based on the strategic interaction in cost‐reducing investment decisions between domestic firms and a foreign firm, which is different from the common factors that are discussed in the literature such as spillovers and technology sourcing. Our results are as follows. We show that domestic R&D investment may either increase or decrease the foreign firm's FDI incentives. Further, depending on the marginal cost of domestic firms, domestic R&D incentives can always increase regardless of the effects of domestic R&D investment on the foreign firm's FDI decision. Finally, we find that domestic welfare improves under domestic cost reduction if the slope of the marginal cost of domestic R&D investment is sufficiently small.     

Does Innovation Matter for Chinese High-Tech Exports? A Firm-Level Analysis

This paper investigates the impact of innovation on export decisions of Chinese high-tech firms during the period of 2005–2007. Using a parametric, instrumental variable approach and a non-parametric matching method, we find that firm-level innovation efforts, measured by R&D spending and new product output, play only a minor role for domestic exporters. Foreign-invested firms dominate the high-tech exports but do not rely on indigenous innovation activities. These results demonstrate that the success of Chinese high-tech exports does not result from heavy R&D expenditure and technological progress. Moreover, different types of innovation measures show different impacts on the likelihood of exporting. The impacts of innovation on exporting vary widely across industries and Chinese regions.     

Cross-Country Externalities of Trade and FDI Liberalization

We develop a three-country heterogeneous-firm model and show that FDI liberalization in one foreign country (F1) results in the following: (i) some firms from the home country switch from export to FDI in F1; (ii) skilled labor’s wage rate drops in the home country; (iii) wage inequality between the skilled and unskilled labor decreases; and (iv) some firms from the home country switch from FDI to export to another foreign country (F2). The effects from trade liberalization are just the opposite, but the effects from education improvement are qualitatively the same as FDI liberalization. The cross-country externalities work through the domestic labor market.     

外商直接投资与美中贸易逆差的实证研究

This article makes an empirical study on the magnifying effect produced by foreign direct investment (hereafter called as FDI) on the US-China trade deficit through co-integration analysis and error-correction modeling. By combining the empirical results, we give out our own opinion that the expansion of the US-China trade deficit is supposed to partly ascribe to the fact that processed industry is the main path of FDI and to Counter sales and trade diversion which are produced by exports on reproduced production by foreign enterprises in China. On the above-mentioned basis, this article concludes that in order to reduce the US-China trade deficit effectively, we are supposed to expand our domestic demand, perfect our inviting-investment policies, implement FDI in China and quicken up the “going out” of our enterprises.     

Commercial Policy and Foreign Ownership

Foreign multinationals often not only export but also control local firms through FDI. This paper examines the various effects of trade and industrial policies when exports and FDI coexist. We focus on the case in which a foreign firm has full control of a local firm through partial ownership. Cross‐border ownership on the basis of both financial interests and corporate control leads to horizontal market linkages through which tariffs and production subsidies may harm locally owned firms but benefit the foreign firm. Foreign ownership regulation benefits locally owned firms. These results could have strong policy implications for developing countries that attract an increasing share of world FDI.     

DECISION TO INVEST ABROAD: THE CASE OF SOUTH KOREAN MULTINATIONALS

Recent firm‐based empirical studies examine whether firms serving foreign markets either through exports or foreign direct investment (FDI) are more efficient than their domestically‐oriented counterparts. The purpose of the present paper is to study the link between performance of multinational firms and the choice to participate in foreign investment. In so doing, this paper explicitly differentiates exports and FDI decisions. Using firm‐level data for large South Korean manufacturing firms, I provide evidence that the premium for FDI is huge compared to exports, and that good firms undertake FDI. Studying performance across firms, I find that firms that engage in FDI outperform other firms in the future in all possible dimensions; they are larger, pay higher wages, and are also more productive. These results are consistent with the hypothesis that good firms self‐select to engage in FDI. I also find clear evidence that past FDI experience has a strong positive effect on the probability of current investment abroad. This implies that the sunk cost involved in FDI plays a role in current decisions to undertake FDI.     

The impact of foreign direct investment on innovation at domestic firms: Evidence from the deregulation of foreign investment in China

This paper studies the impact of foreign direct investment (FDI) on innovation by domestic firms in China. A difference-in-difference estimation strategy yields causal evidence by exploiting China's deregulation of FDI in 2002. Analysis of a matched firm–patent data set from 1998 to 2007 shows that both the quantity and quality of innovation by domestic firms benefited from the presence of FDI. Emphasizing the importance of knowledge spillover from FDI in similar technology domains, the authors examine the role of horizontal FDI and FDI in technologically close industries—those sharing similar technology domains. Findings show that the latter generates much more substantial positive spillover than the former. The paper also shows that knowledge spillover from FDI in similar technology domains is not driven by input–output linkages. In addition, the spillover effect is stronger in cities with higher human capital stock and firms with higher absorptive capacity.     

Foreign Direct Investment and the Incentives to Innovate and Imitate*

We propose a new channel of FDI spillovers on domestic firms, which operates through imitation of original products. Domestic heterogeneous firms may not introduce any new products, introduce a new product line (innovate), or develop a variety that is a close substitute to an existing product line (imitate). The presence of foreign firms generates incentives for imitation because they introduce original products that are vertically differentiated from domestic products. Using firm‐level panel data for China, we find that increased FDI presence in a given industry leads to more imitation, but not necessarily more innovation, by domestic firms.     

外国技术授权策略与本国关税政策之探讨

该文将以一个拥有技术优势,且将其产品输往本国寡占市场中的外国厂商为对象,探讨其对本国厂商的最适技术授权策略,以及该策略是否受关税保护贸易政策之影响.在该文的研究结论中,我们可以发现下列三点:(1)在自由贸易条件下,当外国企业可授权国内二家厂商时,其最适授权策略,会选择同时授权于国内二家技术劣势厂商.当外国厂商仅可授权国内一家技术劣势厂商时,若市场规模相对较小,国外技术优势厂商之最适单位权利金订定为存在内部解,且会受市场规模的影响,市场规模值愈大,权利金愈高.当市场规模相对较大时,则国外技术优势厂商之最适单位权利金恰等于其技术创新所能节省的成本幅度.(2)在关税政策条件下,国外技术优势厂商可同时授权国内二家厂商时,其授权策略不受关税政策影响.在可授权国内一家技术劣势厂商时,若市场规模相对较大,其授权策略不受关税政策影响.若市场规模相对较小,在自由贸易条件下外国厂商的授权权利金将高于采取关税政策条件下的水准.(3)在本国政府的最适关税政策下,不论是当外国厂商可授权本国二家厂商之 Nash 均衡或可授权本国一家厂商之 Nash 均衡,皆有助于本国福利水准的提升.