Vai Io Lo

Foreign direct investment and economic performance in transition economies: evidence from China

Based upon a production function with FDI representing updated technology from more developed, market‐based economies, this study tests the hypothesis that FDI contributes to the economic growth of less developed, transition economies via technology updating, using data for 30 Chinese provinces from 1985 to 2000. It is found that provinces with a higher FDI ratio experienced faster technology updating and more rapid economic growth. The study suggests that less developed, transition economies should encourage FDI from more developed, market‐based economies so as to accelerate technology updating and economic growth.

Cross-region FDI productivity spillovers in transition economies: Evidence from China

Prior studies have failed to examine the spatial dimension of FDI productivity spillovers in transition economies. Using data from China, this article investigates how FDI in one location may affect the productivity of domestic firms in another location. The study finds strong evidence that FDI in the growth pole on the coast adversely affects the productivity of domestic firms in the peripheral interior. There is also some evidence that FDI in the peripheral interior positively affects the productivity of domestic firms in the growth pole on the coast. The findings indicate that the inflows of FDI contribute to the widening regional disparities in transition economies like China.

Property rights, productivity gains, and economic growth: The Chinese experience

This study finds that the Chinese experience cannot, as some have claimed, pose a challenge to the property rights theory. The unsatisfactory economic performance of the Chinese private sector in the 1980s is attributed to the discriminatory legal environment within which private property rights developed. Private property rights had to develop under the disguise of collectives. Once the political and legal environments improved in the 1990s, the private sector achieved significantly greater productivity gains and contributed more to economic growth than all other sectors. Accordingly, private property rights are crucial to economic performance; China is no exception.

Conviction and punishment: Free press and competitive election as deterrents to corruption

Abstract Democratic institutions are not equally effective in curbing corruption. Using a criminal behavior model, this study formulates the hypothesis that corruption offenders, being risk-inclined, are deterred more by conviction-reinforcing democratic institutions than by punishment-reinforcing democratic institutions. Evidence based on cross-country regressions strongly supports this hypothesis, indicating that compared with competitive election, free press is a more effective deterrent to corruption. While shedding light on why corruption remains rampant in some electoral democracies – particularly the illiberal democracies – this study identifies a key to corruption control.

The ‘insider’ and ‘outsider’ effects of FDI technology spillovers: Some evidence

ABSTRACT:Extant studies on FDI technology spillovers have reached inconclusive findings, indicating that the effect of FDI technology spillovers is likely to be contingent on a variety of factors. The present paper argues that one of the likely contingent factors is the distinction between FDI as an insider and FDI as an outsider to individual domestic firms. For instance, FDI in industry A is considered as insider FDI by domestic firms in industry A, but outsider FDI by domestic firms in industry B. Similarly, FDI in location X is considered as insider FDI by domestic firms in location X, but outsider FDI by domestic firms in location Y. Most extant studies failed to make this distinction. To fill this research gap, the present paper distinguishes industrial outsider FDI technology spillovers from industrial insider FDI technology spillovers on the one hand, and regional outsider FDI technology spillovers from regional insider FDI technology spillovers on the other. The study develops hypotheses, and tests them against firm-level data of the National Industrial Enterprise Survey compiled by the China National Bureau of Statistics. The paper finds that FDI as an industrial insider as well as a regional insider tends to produce positive technology spillovers, whereas FDI as an industrial outsider as well as a regional outsider tends to produce negative technology spillovers. In particular, FDI located in the advanced coastal region tends to adversely affect the productivity of domestic firms located in the interior region no matter whether or not the domestic firms are located in the same industry as the FDI. The patterns of FDI technology spillovers help explain the radical industrial upgrading associated with FDI in China, especially the rise of industries with substantial FDI inflows such as electronics, home appliance, and automobile in recent decades. The patterns of FDI technology spillovers also help explain the widening regional gap between the advanced East Coast region with substantial FDI inflows and the backward Inland region with limited FDI. Findings of the study have important implications for both managers of multinationals and the government of transition economies. While investing in rising industries, multinationals need to consider investing in these industrial sectors in the backward region of transition economies. While facilitating industrial upgrading, the government of transition economies should formulate effective policies to encourage multinationals to invest in rising industries in the backward region.

Australia's Trade, Investment and Security in the Asian Century

The rise of Asian economies has ushered in the Asian century. States or economies in other continents, including those in Europe, North America, South America and Africa, have taken steps to commence or enhance trade relations with expanding Asian economies, while being cautious in maintaining established prestige or safeguarding national security. Owing to its geographical proximity to Asia and its Anglo-American political affinity as well as European cultural heritage, Australia has been juggling with two competing objectives — quantifiable economic prosperity resulting from increased trade and investment with Asian economies (especially China) and the perceived national or regional security derived from remaining a loyal ally of the US — even though these attributes have also placed it in an enviable position. At this juncture, the question is how Australia can achieve both prosperity and security and meet its aspiration for esteem in the international community…

Fdi technology spillovers in China: Implications for developing countries

Since the 1980s, multinational corporations (MNCs) have increasingly invested in production and service facilities in developing countries. In the meantime, developing countries adopted preferential policies to attract foreign direct investment (FDI) in the hope that FDI can bring in advanced technology. However, FDI is a double-edged sword, generating positive as well as negative technology spillovers. Extant studies focus on the simple issue of whether the presence of FDI affects domestic firms, and have limited policy implications for developing countries. This paper is intended to fill this research gap. Differing from extant studies, the paper tries to identify the individual channels through which positive and negative FDI technology spillovers take place in different entry modes, and draws practical implications for developing countries in making policies on MNC entry modes and investment priorities. The paper distinguishes between different forms of FDI presence, including tangible assets and intangible assets, exported products and domestically sold products, new products and traditional products, employment of skilled workers and employment of unskilled workers, and takes them as different channels by which FDI technology spillovers take place. Meanwhile, the paper distinguishes between wholly foreign owned enterprise and joint venture, and takes the two entry modes as different organizational settings in which FDI technology spillovers occur. The paper then examines how FDI technology spillovers take place through each of these channels under each of the entry modes, and tests hypotheses against firm-level data from China. The study finds that positive FDI technology spillovers take place through tangible rather than intangible assets, domestically sold rather than exported products, traditional rather than new products, and employment of unskilled rather than skilled workers in joint ventures. In contrast, negative FDI technology spillovers take place through exported products and employment of skilled workers in wholly foreign owned enterprises. The findings suggest that developing countries should encourage MNCs to enter their markets in the form of joint ventures rather than wholly foreign owned enterprises. Moreover, they should encourage MNCs to invest in tangible assets, production of domestically-consumed products and traditional products, and employment and training of unskilled local workers in joint ventures. Furthermore, they should help domestic firms overcome the adverse effect of market stealing and skill stealing generated by wholly foreign owned enterprises.

Conclusions: The BRICS - Ascendancy, decline or plateau?

Taking an interdisciplinary approach, Vai Io Lo and Mary Hiscock, together with scholars and researchers from around the world, investigate the rise of the BRICS and assess the extent of their further development and influence from the perspectives of economics, international relations and law.