FDI Spillover Effects in China’s Manufacturing Sector: New Evidence From Forward and Backward Linkages
This paper assesses the spillover effects of inward foreign direct investment (FDI) on firm-level productivity growth in China’s manufacturing sector over the period 2006–2009. We use a detailed industrial classification of data to characterise both intra-industry and interindustry linkages, in contrast to most previous studies for developing countries. Our findings suggest that there is a negative short-term effect and a positive long-run effect from FDI at both linkage levels. Among the interindustry linkages, in line with previous studies, the backward linkage is an important channel for domestic firms to obtain technology spillovers in the long run. However, our results also indicate that forward linkages are equally important, as we find a strongly positive impact of this linkage on productivity growth of domestic manufacturing firms in China.
KeywordsForeign direct investment Technology spillovers Productivity growth
- Agarwal, N., Milner, C., & Riaño, A. (2013). Credit constraints and FDI Spillovers in China. SSRN Working Paper. Available at SSRN: https://ssrn.com/abstract=1966037.
- Fons-Rosen, C., Kalemli-Ozcan, S., Sørensen, B. E., Villegas-Sanchez, C., & Volosovych, V. (2013). ‘Quantifying Productivity Gains from Foreign Investment’. NBER Working Paper 18920.Google Scholar
- Li, C. (2017). The impact of foreign direct investment on civil conflict, economic growth, and productivity in less developed countries: Evidence from country-level and firm-level analysis. Unpublished PhD thesis: Coventry University.Google Scholar
- Moran, T. (2011). Foreign direct investment and development: Launching a second generation of policy research: Avoiding the mistakes of the first, reevaluating policies for developed and developing countries. New York: Columbia University Press.Google Scholar
- Ni, B., Spatareanu, M., Manole, V., Otsuki, T., & Yamada, H. (2015). How will the origin of FDI affect domestic firms’ TFP? – Evidence from Vietnam. Osaka University Working Paper. Available from http://s3.amazonaws.com/academia.edu.documents/40066563/How_Will_the_Origin_of_FDI_revise_20151020.pdf?AWSAccessKeyId=AKIAIWOWYYGZ 2Y53UL3A&Expires=1485957708&Signature=7HN%2BohVUxdvRpxlk7%2FqqHrUxQY0% 3D&response-content-disposition=inline%3B%20filename%3DHow_Will_the_Origin_of_FD I_Affect_Domest.pdf.
- Zou, B. (2009). A study on FDI Techonology spillover channels and TFP growth of China’s manufacturing sector (1st ed.). Nanjing: Southeast University Press.Google Scholar