The Impact of FDI on Domestic Firm Innovation : Evidence from Foreign Investment Deregulation in China

The Impact of FDI on Domestic Firm Innovation : Evidence from Foreign Investment Deregulation in China

This paper studies the impact of foreign direct investment on domestic firms’ innovation in China. It provides causal evidence by exploiting China’s foreign direct investment deregulation in 2002 and employs a difference-in-difference estimation st...

Full description

Bibliographic Details
Main Authors: Liu, Yan, Wang, Xuan
Format: Working Paper
Language:English
Published: World Bank, Washington, DC 2021
Subjects:
FOREIGN DIRECT INVESTMENT
INNOVATION
SPILLOVER EFFECT
TECHNOLOGY CLOSENESS
FIRM INNOVATION
Online Access:http://documents.worldbank.org/curated/en/922111621871641547/The-Impact-of-FDI-on-Domestic-Firm-Innovation-Evidence-from-Foreign-Investment-Deregulation-in-China
http://hdl.handle.net/10986/35633
id okr-10986-35633
recordtype oai_dc
spelling okr-10986-356332021-06-02T05:10:47Z The Impact of FDI on Domestic Firm Innovation : Evidence from Foreign Investment Deregulation in China Liu, Yan Wang, Xuan FOREIGN DIRECT INVESTMENT INNOVATION SPILLOVER EFFECT TECHNOLOGY CLOSENESS FIRM INNOVATION This paper studies the impact of foreign direct investment on domestic firms’ innovation in China. It provides causal evidence by exploiting China’s foreign direct investment deregulation in 2002 and employs a difference-in-difference estimation strategy. Using a matched firm-patent data set from 1998 to 2007, the results show that the quantity and quality of domestic firms’ innovation benefit from foreign direct investment. Moreover, the paper emphasizes the importance of knowledge spillover from foreign direct investment in similar technology domains. The analysis examines the role of horizontal foreign direct investment and foreign direct investment in technologically close industries—industries that share similar technology domains. The findings show that foreign direct investment in technologically close industries generates much bigger positive spillovers than horizontal foreign direct investment. The paper also shows that knowledge spillover from foreign direct investment in similar technology domains is not driven by input-out linkages. Moreover, the spillover effect is stronger in cities with higher human capital stock and firms with higher absorptive capacity. 2021-06-01T22:09:59Z 2021-06-01T22:09:59Z 2021-05 Working Paper http://documents.worldbank.org/curated/en/922111621871641547/The-Impact-of-FDI-on-Domestic-Firm-Innovation-Evidence-from-Foreign-Investment-Deregulation-in-China http://hdl.handle.net/10986/35633 English Policy Research Working Paper;No. 9672 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper East Asia and Pacific China
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic FOREIGN DIRECT INVESTMENT
INNOVATION
SPILLOVER EFFECT
TECHNOLOGY CLOSENESS
FIRM INNOVATION
spellingShingle FOREIGN DIRECT INVESTMENT
INNOVATION
SPILLOVER EFFECT
TECHNOLOGY CLOSENESS
FIRM INNOVATION
Liu, Yan
Wang, Xuan
The Impact of FDI on Domestic Firm Innovation : Evidence from Foreign Investment Deregulation in China
geographic_facet East Asia and Pacific
China
relation Policy Research Working Paper;No. 9672
description This paper studies the impact of foreign direct investment on domestic firms’ innovation in China. It provides causal evidence by exploiting China’s foreign direct investment deregulation in 2002 and employs a difference-in-difference estimation strategy. Using a matched firm-patent data set from 1998 to 2007, the results show that the quantity and quality of domestic firms’ innovation benefit from foreign direct investment. Moreover, the paper emphasizes the importance of knowledge spillover from foreign direct investment in similar technology domains. The analysis examines the role of horizontal foreign direct investment and foreign direct investment in technologically close industries—industries that share similar technology domains. The findings show that foreign direct investment in technologically close industries generates much bigger positive spillovers than horizontal foreign direct investment. The paper also shows that knowledge spillover from foreign direct investment in similar technology domains is not driven by input-out linkages. Moreover, the spillover effect is stronger in cities with higher human capital stock and firms with higher absorptive capacity.
format Working Paper
author Liu, Yan
Wang, Xuan
author_facet Liu, Yan
Wang, Xuan
author_sort Liu, Yan
title The Impact of FDI on Domestic Firm Innovation : Evidence from Foreign Investment Deregulation in China
title_short The Impact of FDI on Domestic Firm Innovation : Evidence from Foreign Investment Deregulation in China
title_full The Impact of FDI on Domestic Firm Innovation : Evidence from Foreign Investment Deregulation in China
title_fullStr The Impact of FDI on Domestic Firm Innovation : Evidence from Foreign Investment Deregulation in China
title_full_unstemmed The Impact of FDI on Domestic Firm Innovation : Evidence from Foreign Investment Deregulation in China
title_sort impact of fdi on domestic firm innovation : evidence from foreign investment deregulation in china
publisher World Bank, Washington, DC
publishDate 2021
url http://documents.worldbank.org/curated/en/922111621871641547/The-Impact-of-FDI-on-Domestic-Firm-Innovation-Evidence-from-Foreign-Investment-Deregulation-in-China
http://hdl.handle.net/10986/35633
_version_ 1764483462320881664

Similar Items