How does the productivity of foreign direct investment spill over to local firms in Chinese manufacturing?

Abstract:

We use a firm-level dataset for Chinese manufacturing, to estimate productivity spillovers from foreign direct investment (FDI) to local firms. The spillover channels considered include inter-firm labour turnover/mobility; vertical input-output linkages; exporting externalities; and horizontal effects. The roles of these channels are dependent on various factors including export propensity, R&D expenditure per capita, employee training, and ownership structure. We find that export of multinational enterprises (MNEs) is the most prominent spillover channel. Labour turnover and horizontal demonstration and competition bring positive spillovers to SOEs but not to local private firms. Vertical linkages are not found to be significant.

Keywords: productivity spillover; foreign direct investment (FDI); labour mobility/turnover; linkages; export

Document Type: Research article

DOI: 10.1080/14765280902847676

Affiliations: 1: School of Services Management, Bournemouth University, UK 2: School of Economic and Management Studies, Keele University, UK,School of Economics, University of Nottingham, UK,School of Economics, Renmin University of China, China 3: School of Economics, University of Nottingham, UK