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Does Openness Increase the Efficiency of China¡¯s Manufacturing Firms? Evidence from the World Bank Investment Climate Survey

Author

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  • Wenjun Liu
  • Shuliang Zou

    (College of Economics and Management, University of South China, Hengyang 421001, China)

Abstract

Based on the World Bank Investment Climate Survey, this paper investigates the openness effects on the efficiency of firms in China¡¯s manufacturing industry using a two-step data envelopment analysis (DEA) approach. In the first step, the aggregate efficiency of open firms and non-open firms is compared in each sub-industry using a group-wise heterogeneous bootstrap procedure. The results show, at a 90% confidence level, that open firms are more efficient than non-open firms in four out of five sub-industries. Furthermore, in the second step, we employ the two-stage bootstrap DEA approach to more specifically evaluate the effects of openness on the efficiency of firms. The regression results show that three openness indicators (foreign capital, import and export) have strong positive effects on firms¡¯ efficiency in China¡¯s manufacturing industry. In addition, the results also suggest that a larger state share, larger firm size, and more capital stock are negatively related to the efficiencies of firms, while a firms¡¯ learning and absorptive capacity is positively related to its efficiency.

Suggested Citation

  • Wenjun Liu & Shuliang Zou, 2013. "Does Openness Increase the Efficiency of China¡¯s Manufacturing Firms? Evidence from the World Bank Investment Climate Survey," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 8(3), pages 430-451, September.
    • Handle: RePEc:fec:journl:v:8:y:2013:i:3:p:430-451
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-002-013-0021-7
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    Citations

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    Cited by:

    1. Huirui Zhang & Sanbao Zhang, 2022. "How Does the Sustainable Investment Climate Affect Firm Geographic Diversification in China? Managerial Discretion as a Mediator," Sustainability, MDPI, vol. 14(5), pages 1-16, February.
    2. Hussein Al-Zyoud & Asheref Illiyan & Vasim Akram, 2022. "Impact of Economic Openness on Macro Technical Efficiency in South Asia," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 28(3), pages 91-103, November.
    3. Yohanes Andika Tjitrajaya & Charvin Lim & Shafiah Meike Serepina Pasaribu & Ferensky Regina Sandjaja & Ivantia Savitri Mokoginta, 2021. "The importance of economic openness on technical efficiency in global perspective," International Journal of Economic Policy Studies, Springer, vol. 15(2), pages 387-403, September.

    More about this item

    Keywords

    openness; efficiency; China; DEA; Investment Climate Survey;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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