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Foreign direct investment and productivity spillovers in the Chinese manufacturing sector
Authors:Xiaoying Li  Xiaming Liu  David Parker
Institution:1. School of economics and management, Beihang University, No.37 Xueyuan Road, Haidian District, Beijing, 100083, P.R. China;2. China Electronics Standardization Institute, No.1 East Andingmen Street, Beijing, 100007, P.R. China;3. School of Management, Xi’an Jiaotong University, No.28, Xianning West Road, Xi’an, 710049, P.R. China;1. School of Management and Economics, Beijing Institute of Technology, Beijing 100081, China;2. Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, China;3. Collaborative Innovation Center of Electric Vehicles in Beijing, Beijing 100081, China;4. Sustainable Development Research Institute for Economy and Society of Beijing, Beijing 100081, China;5. Beijing Key Lab of Energy Economics and Environmental Management, Beijing 100081, China;6. School of Economics, Nankai University, Tianjin 300000, China;1. China Institute of Manufacturing Development & School of Management Science and Engineering, Nanjing University of Information Science &Technology, Nanjing 210044, China;2. College of Business, Nanjing University of Information Science & Technology, Nanjing 210044, China;3. School of Business, Slippery Rock University, Slippery Rock, PA 16057, USA;4. Business School, Jiangsu Normal University, Tongshan New District, Xuzhou, Jiangsu 221116, China
Abstract:In this paper a simple simultaneous model is constructed to examine whether there are productivity spillovers from both the presence of foreign direct investment (FDI) and competition between local and foreign firms. The model is tested on the data from China’s latest industrial census in 1995. The results indicate that the extent to which spillovers occur varies with different types of ownership of local firms and of FDI. While collective- and private-owned enterprises benefit from demonstration and contagion effects from foreign presence, productivity gains of state-owned enterprises largely come from competition with foreign firms. Productivities of local and foreign firms are jointly determined. Evidence also suggests that market-oriented FDI tends to generate spillovers mainly via competition with local firms.
Keywords:Foreign direct investment  Productivity spillover  Chinese manufacturing sector
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