Title

Do Chinese domestic firms benefit from FDI inflow? Evidence of horizontal and vertical spillovers

Document Type

Journal article

Source Publication

China Economic Review

Publication Date

12-1-2009

Volume

20

Issue

4

First Page

677

Last Page

691

Keywords

China, Foreign direct investment, Spillovers

Abstract

Using a large panel dataset covering all manufacturing firms (above a minimum Scale) in China from 1998 to 2005, this paper examines whether there exist productivity spillovers from foreign direct investment (FDI) to domestic firms. In estimating productivity, we control for a Possible simultaneity bias by using semi-parametric estimation techniques. We find that Hong Kong, Macao and Taiwan (HMT) invested fit ins generate negative horizontal spillovers, while Non-HMT foreign invested firms (mostly from OECD countries) tend to bring positive horizontal spillovers in China. These two opposing horizontal effects seem to cancel out at the aggregate level. We also find strong and robust vertical spillover effects oil both state-owned firms and non-state firms. However, vertical spillover effects from export-oriented FDI are weaker than those from domestic-market-oriented FDI.

DOI

10.1016/j.chieco.2009.05.010

Print ISSN

1043951X

E-ISSN

18737781

Publisher Statement

Copyright © 2009 Elsevier Inc

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Full-text Version

Publisher’s Version

Recommended Citation

Lin, P., Liu, Z., & Zhang, Y. (2009). Do Chinese domestic firms benefit from FDI inflow? Evidence of horizontal and vertical spillovers. China Economic Review, 20(4), 677-691. doi: 10.1016/j.chieco.2009.05.010