How does FDI affect domestic firms' exports? Industrial evidence

Sizhong, Sun (2009) How does FDI affect domestic firms' exports? Industrial evidence. The World Economy, 32 (8). pp. 1203-1222.

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Abstract

Using a Heckman sample selection model estimated using pooled four-year firm-level data, this paper explores the export spillovers from the FDI in the cultural, educational and sporting product manufacturing industry of the manufacturing sector in China from 2000 to 2003. The manufacturing sector contributes around 40 per cent of the GDP in the Chinese economy, and the cultural, educational and sporting product manufacturing industry has a significant proportion of FDI activities, and firms in this sector are active in exporting. Through the empirical exercise, we find that there exist export spillovers from FDI in the industry, for which the magnitude depends on firms' geographical location, sale cost and revenue ratio, and ownership structure. On average, domestic firms located in Western China suffer from a foreign presence, irrespective of whether they are privately owned or state and collectively owned. For firms in Central China, both the privately owned and state and collectively owned firms appear to benefit from foreign presence. Regarding firms located in Coastal China, the privately owned firms suffer from the foreign presence, while in contrast the state and collectively owned firms benefit from the foreign presence. In addition, in this industry there are more firms that benefit from the presence of FDI than those that suffer, which to some extent justifies the government's policy to attract the FDI inflow.

Item ID: 8553
Item Type: Article (Research - C1)
ISSN: 1467-9701
Keywords: export spillovers; FDI; China
Date Deposited: 23 Feb 2010 23:50
FoR Codes: 14 ECONOMICS > 1402 Applied Economics > 140209 Industry Economics and Industrial Organisation @ 50%
14 ECONOMICS > 1402 Applied Economics > 140210 International Economics and International Finance @ 50%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9102 Microeconomics > 910203 Industrial Organisations @ 50%
91 ECONOMIC FRAMEWORK > 9103 International Trade > 910399 International Trade not elsewhere classified @ 50%
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