THE IMPACT OF EXPORTING AND FOREIGN DIRECT INVESTMENT ON PRODUCT INNOVATION: EVIDENCE FROM CHINESE MANUFACTURERS |
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| Authors: | Michael Olabisi |
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| Institution: | 1. 310‐506‐4018310‐506‐4100
0000-0001-7082-1531
Assistant Professor, Department of Economics, Pepperdine University, Malibu, CA;2. Ross School of Business, Department of Business Economics, University of Michigan, Ann Arbor, MI |
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| Abstract: | 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) |
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