Chengqi Wang

FDI, Regional Differences and Economic Growth: Panel Data Evidence from China

Development economists have long argued that countries pursuing externally oriented development strategies are more likely to achieve higher rates of economic growth than those that are internally focused. A number of studies have examined the relationship between inward FDI and economic growth in the developing host countries.1 A generally accepted conclusion is that FDI has played a significant role in promoting economic growth in host countries because FDI represents ‘the transmission to the host country of a package of capital, managerial skills, and technical skills’ (Johnson, 1972, p. 2). An interesting finding of previous studies is that the economic and technological conditions of a recipient economy influence the extent to which FDI contributes to growth.

Do spillover benefits grow with rising foreign direct investment? An empirical examination of the case of China

Using data from the Chinese manufacturing industry for 2001, this article examines the impacts of foreign presence on the performance of locally owned Chinese firms. Our key result supports a curvilinear functional form. Foreign penetration rates in excess of just about two–thirds of industrial capital are associated with declining spillover benefits, indicating the dominance of negative spillovers. The curvilinear relationship is found to be particularly strong in labour-intensive industries, contrasting with a standard linear relationship in technology-intensive sectors. The finding of the complexity of spillover effects challenges the laissez-faire view that ‘the more inward foreign direct investment (FDI), the better’ and that inward FDI into all types of domestic industry is equally valuable, in terms of performance benefits. Our findings argue for policy measures to strengthen domestically owned Chinese industry, to provide effective competition to foreign firms and to absorb the benefits from spillovers more effectively.

Inward FDI and Host Country Productivity: Evidence from China’s Electronics Industry

There has been a great deal of research examining whether foreign affiliates exhibit higher levels of productivity than local firms (see, for example, Aitken and Harrison, 1999). The premise for this is that the firm-specific assets of transnational corporations (TNCs) increase productivity in FDI-receiving firms (Egger and Pfaffermayr, 2001). If this is the case, one would expect FDI to enhance overall industry performance as measured, for example, by labour productivity through this direct effect on foreign affiliate performance. Empirical research supports the view that firms with foreign equity participation outperform firms that are entirely locally-owned (see, for example, Blomstrom and Sjoholm, 1999).

The Relationship Between Inward Foreign Direct Investment and the Performance of Domestically‐owned Chinese Manufacturing Industry

The improvement in performance of Chinese domestically owned industry in 1995 and 2001 is strongly linked to inward foreign direct investment. Rising foreign presence contributes towards the narrowing of the performance gap between foreign and locally owned enterprises in China. While investment by overseas Chinese firms benefits overall Chinese industry throughout, developed country FDI only generated a positive impact in 2001. Inward FDI by both investor groups benefits Chinese state owned enterprises, but not until 2001 for collectively owned Chinese firms. The results support the use of inward FDI as a development policy tool, in conjunction with economic liberalization.

The Role of Time in Assessing the Economic Effects of R&D

This study investigates the impacts of R&D on firm performance. It extends previous research by constructing alternative stocks of R&D‐Capital that take into account that time plays an important role in assessing the pay‐off of industrial research. The results show that even when we employed R&D‐Capitals that placed more emphasis on the industrial research that had been undertaken 7 years ago, the effects of R&D were very (statistically) significant and relatively high, thereby suggesting that the life of R&D (on average) tends to be long. The results however, vary across organizations depending on both firm size and the technological opportunities that a company faces. It appears that the depreciation rate of R&D investments is higher in the case of technologically sophisticated firms. In contrast, strategic investments in industrial research generate a relatively constant effect on the performance of other firms, supporting the notion that the corresponding returns for such firms decay slowly.

The Impact of Inward Foreign Direct Investment on the Nature and Intensity of Chinese Manufacturing Exports

The contribution of transnational corporations (TNCs) to exports from developing countries has long been a point of debate. Host countries often complain that TNCs export too little, and the findings in some studies support these arguments. For example, Lall and Mohammad (1983) found that TNCs performed rather poorly in generating exports from India. However, other empirical studies have suggested the opposite, showing that inward foreign direct investment (FDI) was export-oriented and raised the level of exports from host economies (O’Sullivan, 1993; Blake and Pain, 1994; Cabrai, 1995). Research on the role of inward FDI in improving Chinese export performance has been a more recent addition to the literature. Many studies found evidence of a generally positive and significant role for inward FDI in promoting the expansion of Chinese exports (Buckley, Clegg and Wang, 2002; Sun, 1999, 2001; Zhang and Song, 2000).

How do resources and diversification strategy explain the performance consequences of internationalization

Purpose – The purpose of this paper is to examine how firm resources and diversification strategy explain the performance consequences of internationalization of emerging market enterprises. Design/methodology/approach – The paper conducts a regression analysis by using a novel panel data set comprising of 685 listed Chinese firms over the period of 2008-2011. Findings – The results show that the relationship between internationalization and performance is inverse U-shaped. Further, marketing resources play a greater role in enhancing the performance effects of internationalization than technological resources do. Related product diversification enhances the performance effects, while unrelated product diversification does the contrary. Research limitations/implications – The study focusses on listed firms in one country, and as a result, the findings cannot be generalized to non-listed firms and firms in other countries. Practical implications – This paper offers guidelines for international managers to ...

Effects of outward FDI on home-country export competitiveness: The role of location and industry heterogeneity

Purpose - The purpose of this paper is to examine the effects of outward foreign direct investment (O-FDI) on the competitiveness of home-country export. Design/methodology/approach - This paper employs a six-year data set from Taiwanese manufacturing data for 15 industries over the period between 1991 and 2007. Findings - The authors find that exports in Taiwan are positively associated with O-FDI by Taiwanese firms. This finding supports the view that outward FDI complements home country exports and concurs with the majority of earlier empirical findings which focus on developed home countries. The authors also find that such effect is stronger for Taiwanese FDI in China than in other countries and in traditional sectors than in modern sectors. Originality/value - These findings suggest that location-and industry-specific characteristics moderate the strength of the relationship between O-FDI and home country exports.

The relative economic performance of foreign subsidiaries in UK manufacturing

This paper compares the economic performance of UK and foreign-owned firms in UK manufacturing industry. A panel data set covering 14 233 firms for the period 1992–1996 is used and the influences of firm-, industry- and country-specific advantages on productivity are examined. The results of the study show that labour productivity is higher in foreign subsidiaries than in UK firms and that foreign subsidiaries as a whole employ higher levels of human capital and enjoy greater economies of scale. A further source of productivity advantage for US subsidiaries is their higher level of intangible assets, and for European and Japanese subsidiaries their higher level of capital intensity. The results have policy implications for the targeting of promotion activities to attract FDI.

Home institutions, internationalization and firm performance

Purpose – The purpose of this paper is to examine how home institutions moderate the influence of internationalization, and the effect this has on the performance of stock-listed Chinese firms. Design/methodology/approach – A sample of 118 stock-listed Chinese firms over the period 2006-2011 was considered, using the panel data method. Findings – The results show that foreign ownership and region-specific marketization help firms reap the performance benefits of internationalization, while state ownership plays an insignificant role. Research limitations/implications – The findings may not hold for unlisted firms, service firms or firms from other emerging economies. Practical implications – The study suggests that Chinese managers should take advantage of home country institutions to improve the effects of internationalization on performance. Originality/value – This research suggests that the analysis of the performance consequences of internationalization should go beyond the nexus between internationa...