IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v47y2015i16p1633-1651.html
   My bibliography  Save this article

Foreign direct investment in R&D and domestic entrepreneurship in China's manufacturing industries

Author

Listed:
  • Sajid Anwar
  • Sizhong Sun

Abstract

This paper argues that internationalization of innovation and the related spillovers can also affect the likelihood of firm entry and exit into an industry. By making use of firm-level panel data from China over the period 2005 to 2007, this paper examines the impact of foreign direct investment (FDI) in research and development (R&D) and the related linkages on entry and exit likelihoods of domestic firms in (i) transport equipment and (ii) electrical machinery and equipment manufacturing industries. In order to evaluate the region-of-origin effect, this paper also separately examines the impact of FDI in R&D originating from (i) all countries except Hong Kong, Macau and Taiwan and (ii) Hong Kong, Macau and Taiwan. Furthermore, the impact of FDI in R&D on entry and exit of Chinese firms in the two industries is examined by splitting the data into large and small firms within the two industries. The results of the pooled probit regression reveal that FDI in R&D and the related spillovers can have a significant impact on the likelihood of entry and exit of domestic firms in transport equipment and electric machinery and equipment industries. The empirical analysis also suggests that the impact of changes in FDI in R&D and the related spillovers varies across firm size.

Suggested Citation

  • Sajid Anwar & Sizhong Sun, 2015. "Foreign direct investment in R&D and domestic entrepreneurship in China's manufacturing industries," Applied Economics, Taylor & Francis Journals, vol. 47(16), pages 1633-1651, April.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:16:p:1633-1651
    DOI: 10.1080/00036846.2014.1000527
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2014.1000527
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036846.2014.1000527?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Aitken, Brian & Hanson, Gordon H. & Harrison, Ann E., 1997. "Spillovers, foreign investment, and export behavior," Journal of International Economics, Elsevier, vol. 43(1-2), pages 103-132, August.
    2. Walter Kuemmerle, 1999. "The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(1), pages 1-24, March.
    3. Joachim Wagner, 2016. "Exports and Productivity: A Survey of the Evidence from Firm Level Data," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 1, pages 3-41, World Scientific Publishing Co. Pte. Ltd..
    4. Ruth Rama, 2008. "Foreign investment innovation: a review of selected policies," The Journal of Technology Transfer, Springer, vol. 33(4), pages 353-363, August.
    5. Anupama Phene & Paul Almeida, 2008. "Innovation in multinational subsidiaries: The role of knowledge assimilation and subsidiary capabilities," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(5), pages 901-919, July.
    6. Nigel Driffield, 1999. "Determinants of entry and exit in the foreign owned sector of UK manufacturing," Applied Economics Letters, Taylor & Francis Journals, vol. 6(3), pages 153-156.
    7. Sourafel Girma & Holger Görg & Mauro Pisu, 2016. "Exporting, linkages and productivity spillovers from foreign direct investment," World Scientific Book Chapters, in: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT Volume 53: World Scientific Studies in International Economics, chapter 10, pages 191-211, World Scientific Publishing Co. Pte. Ltd..
    8. Giroud, Axèle & Scott-Kennel, Joanna, 2009. "MNE linkages in international business: A framework for analysis," International Business Review, Elsevier, vol. 18(6), pages 555-566, December.
    9. Paul Almeida & Anupama Phene, 2004. "Subsidiaries and knowledge creation: the influence of the MNC and host country on innovation," Strategic Management Journal, Wiley Blackwell, vol. 25(8‐9), pages 847-864, August.
    10. Ito, Banri & Wakasugi, Ryuhei, 2007. "What factors determine the mode of overseas R&D by multinationals? Empirical evidence," Research Policy, Elsevier, vol. 36(8), pages 1275-1287, October.
    11. Peter J Buckley & Pervez N Ghauri, 2004. "Globalisation, economic geography and the strategy of multinational enterprises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(3), pages 255-255, May.
    12. John Cantwell & Simona Iammarino, 2000. "Multinational Corporations and the Location of Technological Innovation in the UK Regions," Regional Studies, Taylor & Francis Journals, vol. 34(4), pages 317-332.
    13. Joanna Scott-Kennel, 2007. "Foreign direct investment and local linkages: An empirical investigation," Management International Review, Springer, vol. 47(1), pages 51-77, February.
    14. Jindra, Björn & Giroud, Axèle & Scott-Kennel, Joanna, 2009. "Subsidiary roles, vertical linkages and economic development: Lessons from transition economies," Journal of World Business, Elsevier, vol. 44(2), pages 167-179, April.
    15. Bernhard Dachs & Andreas Pyka, 2010. "What drives the internationalisation of innovation? Evidence from European patent data," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 19(1), pages 71-86.
    16. Sajid Anwar & Sizhong Sun, 2014. "Entry of foreign firms and the R&D behaviour: a panel data study of domestic and foreign firms in China's manufacturing sector," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(8), pages 739-757, November.
    17. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    18. Tian, Xiaowen, 2010. "Managing FDI technology spillovers: A challenge to TNCs in emerging markets," Journal of World Business, Elsevier, vol. 45(3), pages 276-284, July.
    19. Peter J Buckley & Pervez N Ghauri, 2004. "Globalisation, economic geography and the strategy of multinational enterprises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(2), pages 81-98, March.
    20. Liu, Qing & Lu, Ruosi & Zhang, Chao, 2014. "Entrepreneurship and spillovers from multinationals: Evidence from Chinese private firms," China Economic Review, Elsevier, vol. 29(C), pages 95-106.
    21. Ambos, Bjorn, 2005. "Foreign direct investment in industrial research and development: A study of German MNCs," Research Policy, Elsevier, vol. 34(4), pages 395-410, May.
    22. Iwasa, Tomoko & Odagiri, Hiroyuki, 2004. "Overseas R&D, knowledge sourcing, and patenting: an empirical study of Japanese R&D investment in the US," Research Policy, Elsevier, vol. 33(5), pages 807-828, July.
    23. Klaus E Meyer & Evis Sinani, 2009. "When and where does foreign direct investment generate positive spillovers? A meta-analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(7), pages 1075-1094, September.
    24. Anwar, Sajid & Sun, Sizhong, 2012. "FDI and market entry/exit: Evidence from China," Journal of Asian Economics, Elsevier, vol. 23(5), pages 487-498.
    25. Du, Luosha & Harrison, Ann & Jefferson, Gary H., 2012. "Testing for horizontal and vertical foreign investment spillovers in China, 1998–2007," Journal of Asian Economics, Elsevier, vol. 23(3), pages 234-243.
    26. Dunning, John H., 1994. "Multinational enterprises and the globalization of innovatory capacity," Research Policy, Elsevier, vol. 23(1), pages 67-88, January.
    27. ITO Banri & WAKASUGI Ryuhei, 2007. "Factors Determining the Mode of Overseas R&D by Multinationals: Empirical Evidence," Discussion papers 07004, Research Institute of Economy, Trade and Industry (RIETI).
    28. Meghana Ayyagari & Renáta Kosová, 2010. "Does FDI Facilitate Domestic Entry? Evidence from the Czech Republic," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 14-29, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sun, Sizhong & Anwar, Sajid, 2017. "Foreign direct investment and the performance of indigenous firms in China’s textile industry," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 107-113.
    2. Sara Amoroso & Bettina Müller, 2018. "The short-run effects of knowledge intensive greenfield FDI on new domestic entry," The Journal of Technology Transfer, Springer, vol. 43(3), pages 815-836, June.
    3. Gao, Xing & Meng, Jing & Ling, Yantao & Liao, Maolin & Cao, Mengqiu, 2022. "Localisation economies, intellectual property rights protection and entrepreneurship in China: A Bayesian analysis of multi-level spatial correlation," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 156-165.
    4. Zhaobin Fan & Ruohan Zhang, 2017. "Financial Inclusion, Entry Barriers, and Entrepreneurship: Evidence from China," Sustainability, MDPI, vol. 9(2), pages 1-21, February.
    5. Piers Thompson & Wenyu Zang, 2022. "A matter of life and death? Knowledge intensity of FDI activities and domestic enterprise," Papers in Regional Science, Wiley Blackwell, vol. 101(5), pages 1157-1179, October.
    6. Maoguo Wu & Xierui Han, 2022. "Influence of Economic Openness on Total Factor Productivity: Evidence from China’s Belt and Road Initiative," Sustainability, MDPI, vol. 14(20), pages 1-24, October.
    7. Gao, Xing & Meng, Jing & Ling, Yantao & Liao, Maolin & Cao, Mengqiu, 2022. "Localisation economies, intellectual property rights protection and entrepreneurship in China: a Bayesian analysis of multi-level spatial correlation," LSE Research Online Documents on Economics 114290, London School of Economics and Political Science, LSE Library.
    8. Sajid Anwar & Sizhong Sun, 2019. "Firm heterogeneity and FDI-related productivity spillovers: A theoretical investigation," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 28(1), pages 1-10, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anwar, Sajid & Nguyen, Lan Phi, 2011. "Foreign direct investment and export spillovers: Evidence from Vietnam," International Business Review, Elsevier, vol. 20(2), pages 177-193, April.
    2. Anwar, Sajid & Sun, Sizhong, 2012. "FDI and market entry/exit: Evidence from China," Journal of Asian Economics, Elsevier, vol. 23(5), pages 487-498.
    3. Neil Foster-McGregor, 2012. "Innovation and Technology Transfer across Countries," wiiw Research Reports 380, The Vienna Institute for International Economic Studies, wiiw.
    4. Liu, Ting & Li, Xizhuo, 2022. "How Do MNCs Conduct Local Technological Innovation in a Host Country? An Examination From Subsidiaries' Perspective," Journal of International Management, Elsevier, vol. 28(3).
    5. Perri, Alessandra & Andersson, Ulf & Nell, Phillip C. & Santangelo, Grazia D., 2013. "Balancing the trade-off between learning prospects and spillover risks: MNC subsidiaries’ vertical linkage patterns in developed countries," Journal of World Business, Elsevier, vol. 48(4), pages 503-514.
    6. Cozza, Claudio & Franco, Chiara & Perani, Giulio, 2018. "R&D endowments at home driving R&D internationalisation: Evidence from the Italian business R&D survey," Technological Forecasting and Social Change, Elsevier, vol. 134(C), pages 277-289.
    7. Gavin Murphy & Iulia Siedschlag, 2018. "Determinants of R&D offshoring: firm-level evidence from a small open economy," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 529-553, August.
    8. Schmiele, Anja, 2009. "Drivers for international innovation activities in developed and emerging countries," ZEW Discussion Papers 09-064, ZEW - Leibniz Centre for European Economic Research.
    9. Scott-Kennel, Joanna & Saittakari, Iiris, 2020. "Sourcing or sharing in MNE networks? National headquarters and foreign subsidiaries as knowledge conduits in SMOPECs," International Business Review, Elsevier, vol. 29(1).
    10. Anwar, Sajid & Sun, Sizhong, 2014. "Heterogeneity and curvilinearity of FDI-related productivity spillovers in China's manufacturing sector," Economic Modelling, Elsevier, vol. 41(C), pages 23-32.
    11. Giroud, Axèle & Scott-Kennel, Joanna, 2009. "MNE linkages in international business: A framework for analysis," International Business Review, Elsevier, vol. 18(6), pages 555-566, December.
    12. Anja Schmiele, 2012. "Drivers for international innovation activities in developed and emerging countries," The Journal of Technology Transfer, Springer, vol. 37(1), pages 98-123, February.
    13. Sofka, Wolfgang & Shehu, Edlira & de Faria, Pedro, 2014. "Multinational subsidiary knowledge protection—Do mandates and clusters matter?," Research Policy, Elsevier, vol. 43(8), pages 1320-1333.
    14. de Faria, Pedro & Sofka, Wolfgang, 2010. "Knowledge protection strategies of multinational firms--A cross-country comparison," Research Policy, Elsevier, vol. 39(7), pages 956-968, September.
    15. Christopher Williams & Juana Du, 2014. "The impact of trust and local learning on the innovative performance of MNE subsidiaries in China," Asia Pacific Journal of Management, Springer, vol. 31(4), pages 973-996, December.
    16. Hien T. N. Huynh & Phuong V. Nguyen & Hoa D. X. Trieu & Khoa T. Tran, 2021. "Productivity Spillover from FDI to Domestic Firms across Six Regions in Vietnam," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(1), pages 59-75, January.
    17. Santos, Eleonora & Khan, Shahed, 2018. "Determinant Factors of Pecuniary Externalities," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(8), pages 180-198.
    18. Elisa Giuliani & Chiara Macchi, 2014. "Multinational corporations’ economic and human rights impacts on developing countries: a review and research agenda," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(2), pages 479-517.
    19. Patricia Laurens & Christian Le Bas & Antoine Schoen, 2019. "Worldwide IP coverage of patented inventions in large pharma firms: to what extent do the internationalisation of R&D and firm strategy matter?," Post-Print hal-01725229, HAL.
    20. René Belderbos & Bart Leten & Shinya Suzuki, 2017. "Scientific research, firm heterogeneity, and foreign R&D locations of multinational firms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(3), pages 691-711, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:47:y:2015:i:16:p:1633-1651. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.