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Joint ventures and technology adoption: A Chinese industrial policy that backfired

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  • Howell, Sabrina T.

Abstract

To spur technology transfer, emerging market policymakers often require foreign firms to form joint ventures (JVs) with domestic firms. Through knowledge spillovers, JVs may reduce technology acquisition costs for domestic firms. Yet domestic firm rents from JVs could discourage innovation through a cannibalization effect. Which force dominates is an empirical question. I address it with novel data on China's auto sector. In response to fuel economy standards requiring firms to upgrade technology or sacrifice quality, firms with JVs reduced quality and price relative to their counterparts. Consistent with cannibalization, firms with JVs drive the negative effect.

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  • Howell, Sabrina T., 2018. "Joint ventures and technology adoption: A Chinese industrial policy that backfired," Research Policy, Elsevier, vol. 47(8), pages 1448-1462.
    • Handle: RePEc:eee:respol:v:47:y:2018:i:8:p:1448-1462
    DOI: 10.1016/j.respol.2018.04.021
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    More about this item

    Keywords

    Technology diffusion; Research and development; Joint ventures; Foreign direct investment; Industrial policy;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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