Investment liberalisation, technology take-off and export markets entry: Does foreign ownership structure matter?

Abstract

Abstract:Before and after its accession to the WTO in 2001, China has undergone a far-reaching investment liberalisation. As part of this, existing restrictions on foreign ownership structure and mandatory export and technology transfer requirements imposed on foreign firms have been lifted in a number of industries. Against this background we identify the causal effects of foreign acquisitions on export market entry and technology take-off and evaluate whether the level of foreign ownership plays a role in stimulating these changes. Using doubly robust propensity score reweighted bivariate probit regressions to control for the selection bias associated with firm level foreign acquisition incidences, we uncover strong but heterogeneous positive effects on export activity for all types of foreign ownership structure. We also find that minority foreign owned acquisition targets experience higher likelihood of R&D, providing evidence that joint ventures can contribute positively to China's "science and technology take-off".

Effects of foreign acquisitions on financial constraints, productivity and investment in R&D of target firms in China

“…This supports the contention that foreign acquisitions tend to increase investment in R&D in host countries. Girma et al (2015) point out that to accelerate the pace of technological advancement from abroad, the Chinese government gives a number of incentives to foreign firms engaged in innovative acquisitions and this has led to increase in R&D activities in China. We expect that foreign acquisitions should have positive impact on R&D budgets and this lead to our third hypothesis.…”

Vertical integration and supplier finance

“…22 This approach enables us to include the 19 Propensity score matching (without regression adjustment) has been quite popular in the literature on foreign ownership; see, for example, Arnold and Javorcik (2009) and Girma and Görg (2007). Guadalupe et al (2012) and Girma et al (2015) provide examples of a propensity score reweighting approach combined with regression adjustment. 20 The exact variables used are as follows: k30 contains the value for the answer to the "access to finance" obstacle question.…”

“…() and Girma et al. () provide examples of a propensity score reweighting approach combined with regression adjustment.…”

IT-ITeS sector's export performance - A comparative study using regression

“…Study done by [1] indicate that domestic firms are more export-oriented when compared to foreign-owned subsidiaries.Study [2] found a positive correlation between foreign ownership and export behaviour of large firms in India. Study [15] shows that macroeconomic factors like liberalization, technology and innovation have a positive influence on export intensity with respect to foreign ownership firms. They found strong yet heterogenous positive influence on foreign ownership structure firms using bivariate probit regression analysis method.…”