Export Spillovers of FDI on China's Domestic Firms

Abstract

This paper examines the horizontal and vertical export spillovers of foreign direct investment (FDI) on China's manufacturing domestic firms by using firm-level census data over the period of 2000-03. Based on a Heckman two-step procedure combining first differencing and instrumental variable regression techniques, it is found that FDI has had a positive impact on the export value of domestic firms mainly through backward technology spillovers and a positive impact on the export-to-sales ratio of domestic firms through horizontal export-related information spillovers. After decomposing FDI by different market orientation and domestic firms by different ownership, the paper finds that the positive impact on domestic firms' export values is mainly from the nonexporting and the exporting foreign-invested enterprises while the positive impact on domestic firms' export-to-sales ratios is mainly from the highexporting foreign-invested enterprises. Both types of export spillovers are mainly diffused to domestic non-state-owned enterprises.

Foreign Direct Investment, Trade, and Economic Growth: An Empirical Analysis of Bangladesh

“…They also find that FDI-related spillovers from the rest of the world are heterogeneous but not curvilinear and the size of productivity spillovers depends on firm size and product quality. Chen et al (2013) [12] examined the horizontal and vertical export spillovers of foreign direct investment (FDI) on China's manufacturing domestic firms by using firm-level census data over the period 2000-2003 They found that FDI has had a positive impact on the export value of domestic firms mainly through backward technology spillovers and a positive impact on the export-to-sales ratio of domestic firms through horizontal export-related information spillovers.…”

China’s Overseas Direct Investment and Reverse Knowledge Spillovers

“…Spillovers from IFDI are regarded as an important source of knowledge in developing countries (e.g. Javorcik 2004; Kneller and Pisu 2007;Sheng et al 2011;Chen et al 2013). …”

“…On the other hand, it can crowd local firms out of the product market, and also offers completion in local labour and resources markets (e.g. Aitken and Harrison 1999;Hu et al 2005;Chen 2011Chen , 2015bFu 2011;Sheng et al 2011;Chen et al 2013). The net effects of horizontal knowledge spillovers from IFDI on domestic firms are inconclusive (Gorg and Greenaway 2004).…”

“…Javorcik 2004; Kneller and Pisu 2007;Sheng et al 2011;Chen et al 2013). When IFDI firms supply better intermediate inputs for their customers, or when they transfer knowledge to their suppliers for better quality inputs and on-time delivery, the positive spillovers from IFDI will contribute to domestic firm productivity in downstream and upstream industries.…”

China's Domestic Transformation in a Global Context

“…Vertical FDI knowledge spillovers arise through forward and backward industrial linkages between FDI firms and domestic firms within the supply chain (for example, Chen et al 2013;Girma et al 2004;Javorcik 2004;Kneller and Pisu 2007). When FDI firms provide higher-value intermediate materials for their customers or when they transfer product knowledge to their suppliers, they contribute to domestic firms' productivity and competitiveness in upstream and downstream industries, in turn increasing local economic growth.…”