Productivity Catch‐up Between Chinese and Taiwanese Electronics Firms

This paper aims to depict the patterns of China's productivity catch‐up with Taiwan in the electronics industry over the period 2001–2007. Specifically, we investigate the roles that ownership structure and innovation efforts play in the dynamics of the productivity gap. The firm‐level evidence suggests that the labour productivity gap between Chinese and Taiwanese electronics firms has narrowed during the past decade. Second, the narrowing of the labour productivity gap has occurred in foreign‐owned enterprises rather than in local firms. Examining the determinants of productivity catch‐up show that R&D significantly contributes to Chinese electronics firms' catching up with their Taiwanese counterparts.