GEP Research Paper 09/03
How Does the Productivity of Foreign Direct Investment Spill over to Local Firms in Chinese Manufacturing?
Adam Blake, Ziliang Deng and Rod Falvey
Summary
This paper empirically examines productivity spillovers from foreign firms to local firms in Chinese Manufacturing. Four spillover channels are considered - exports, labour-turnover, forward and backward linkages, and horizontal effects
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 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.
JEL Classifications: O33, F23, J63, L14, F14
Keywords: productivity spillover, foreign direct investment (FDI), labour mobility/turnover, linkages, export
Issued in January 2009
The paper is available in PDF format