Hostname: page-component-77f85d65b8-zzw9c Total loading time: 0 Render date: 2026-04-20T09:06:58.746Z Has data issue: false hasContentIssue false
  • English
  • Français

FDI Spillovers at the National and Subnational Level: The Impact on Product Innovation by Chinese Firms

Published online by Cambridge University Press:  02 February 2015

Jing Li ,
Dong Chen  and
Daniel M. Shapiro
Jing Li
Affiliation:
Simon Fraser University, Canada
Dong Chen
Affiliation:
J.P. Morgan Private Bank Asia, Hong Kong
Daniel M. Shapiro
Affiliation:
Simon Fraser University, Canada
Get access Rights & Permissions [Opens in a new window]

Abstract

We investigate the degree to which the presence of inward foreign direct investments (FDI) influences product innovation by emerging market firms. We begin with FDI spillover effects at the national level, the common approach in the literature. We further examine spillover effects at the subnational level because knowledge spillovers have been found to be localized. We study both intra-industry and inter-industry FDI spillovers in a subnational location, based on the distinction in the cluster literature between Marshall–Arrow–Romer specialization externalities and Jacobian diversification externalities. Using information from more than 346,000 Chinese manufacturing firms from 2000 to 2006, we find that Chinese firms improve product innovation when they are located in cities with concentrated foreign innovative activities in the same industry. These intra-industry spillover benefits decrease quickly, however, as foreign presence increases and, at high levels of foreign concentration, are dominated by the crowding-out effect. We also find evidence of inter-industry spillover benefits in a city; diversity of industries with a foreign presence contributes to product innovation by Chinese firms.

Keywords

Chinese firmsclustersFDI spilloversproduct innovationsubnational FDI spillovers中国企业柒群FDI溢出效应产品创新地区化FDI外溢

Information

Type
Special Issue Articles
Information
Management and Organization Review , Volume 9 , Issue 3: Special Issue Knowledge Search, Spillovers, and Creation in Emerging Markets , November 2013 , pp. 413 - 435
Copyright
Copyright © International Association for Chinese Management Research 2013

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Almeida, P., & Kogul, B. 1999. Localization of knowledge and the mobility of engineers in regional networks. Management Science, 45(7): 905–917.Google Scholar
Arrow, K. J. 1962. The economic implications of learning by doing. The Review of Economic Studies, 29(3): 155–173.Google Scholar
Arthur, W. B. 1989. Competing technologies, increasing returns, and lock-in by historical events. The Economic Journal, 99(394): 116–131.Google Scholar
Audretsch, D. B., & Feldman, M. P. 2004. Knowledge spillovers and the geography of innovation. Inj. Henderson, V. & Thisse, J.-F. (Eds.). Handbook of regional and urban economics, 4: 2713–2739. Amsterdam: Elsevier Google Scholar
Bartelsman, E. J., & Doms, M. 2000. Understanding productivity: Lessons from longitudinal microdata. Journal of Economic Literature, 38(3): 569–594.CrossRefGoogle Scholar
Blomström, M., & Kokko, A. 1998. Multinational corporations and spillovers. Journal of Economic Surveys, 12(3): 247–277.Google Scholar
Brandt, L., Van Biesebroeck, J., & Zhang, Y. 2012. Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing. Journal of Development Economics, 97(2): 339–351.Google Scholar
Caves, R. E. 1996. Multinational enterprise and economic analysis. Cambridge: Cambridge University Press.Google Scholar
Chang, S. J., & Xu, D. 2008. Spillovers and competition among foreign and local firms in China. Strategic Management Journal, 29(5): 495–518.Google Scholar
China Statistical Yearbook. 2006. Beijing: National Bureau of Statistics of China Press.Google Scholar
Dutz, M., Kcssides, I., O'Connell, S., & Willig, R. 2011. Competition and innovation-driven inclusive growth. Policy Research Working Paper 5852, World Bank.Google Scholar
Eden, L. 2009. Letter from the editor-in-chief: FDI spillovers and linkages. Journal of International Business Studies, 40(7): 1065–1069.CrossRefGoogle Scholar
Feldman, M. P. 1999. The new economics of innovation, spillovers and agglomeration: A review of empirical studies. Economics of Innovation and New Technology, 8(1-2): 5–25.Google Scholar
Feldman, M. P., & Audretsch, D. B. 1999. Innovation in cities: Science-based diversity, specialization and localized competition. European Economic Review, 43(2): 409–429.Google Scholar
Garcia, R., & Calantone, R. 2002. A critical look at technological innovation typology and innovativencss terminology: A literature review. Journal of Product Innovation Management, 19(2): 110–132.Google Scholar
Gilbert, B. A., Mcdougall, P. P., & Audretsch, D. B. 2008. Clusters, knowledge spillovers and new venture performance: An empirical examination. Journal of Business Venturing, 23(4): 405–422.Google Scholar
Girma, S., Gong, Y., & Gorg, H. 2009. What determines innovation activity in Chinese state-owned enterprises? The role of foreign direct investment. World Development, 37(4): 866–873.Google Scholar
Glaeser, E. L., Kaliai, H. D., Scheinkman, J. A., & Shleifer, A. 1992. Growth in cities. Journal of Political Economy, 100(6): 1126–1152.Google Scholar
Globerman, S., Shapiro, D., & Vining, A. 2005. Clusters and intcrcluster spillovers: Their influence on the growth and survival of Canadian information technology firms. Industrial and Corporate Change, 14(1): 27–60.Google Scholar
Gorg, H., & Strobl, E. 2005. Spillovers from foreign firms through worker mobility: An empirical investigation. The Scandinavian Journal of Economics, 107(4): 693–709.CrossRefGoogle Scholar
Gorodnichenko, Y., Svejnar, J., & Terrell, K. 2010. Globalization and innovation in emerging markets. American Economic Journal: Macroeconomics, 2(2): 194–226.Google Scholar
Griffith, R., Harrison, R., & Van Reenen, J. 2006. How special is the special relationship? Using the impact of US R & D spillovers on UK firms as a test of technology sourcing. American Economic Review, 96(5): 1859–1875.Google Scholar
Hall, B. H. 2011. Innovation and productivity. National Bureau of Economie Research No. 17178.Google Scholar
Hu, A. G., & Jefferson, G. H. 2009. A great wall of patents: What is behind China's recent patent explosion? Journal of Development Economics, 90(1): 57–68.Google Scholar
Huang, Y. 2003. Selling China: Foreign direct investment during the reform era. Cambridge; New York: Cambridge University Press.Google Scholar
Jacobs, J. 1969. The economy of cities. New York: Random House.Google Scholar
Jaffe, A. B., Trajtenberg, M., & Henderson, R. 1993. Geographic localization of knowledge spillovers as evidenced by patent citations. Quarterly Journal of Economics, 108(3): 577–598.Google Scholar
Jefferson, G. H., Bai, H., Guan, X., & Yu, X. 2006. R & D performance in Chinese industry. Economics of Innovation and New Technology, 15(4-5): 345–366.CrossRefGoogle Scholar
Khanna, T. 2007. Billions of entrepreneurs: How China and India are reshaping their futures – and yours. Boston, MA: Harvard Business School Press.Google Scholar
Li, J., Chen, D., & Shapiro, D. M. 2010. Product innovations in emerging economies: The role of foreign knowledge access channels and internal efforts in Chinese firms. Management and Organization Review, 6(2): 243–266.CrossRefGoogle Scholar
Li, J., Li, Y., & Shapiro, D. M. 2012. Knowledge seeking and outward FDI of emerging market firms: The moderating effect of inward FDI. Global Strategy Journal, 2: 277–295.Google Scholar
Liu, X., Lu, J., Filatotchev, I., Buck, T., & Wright, M. 2010. Returnee entrepreneurs, knowledge spillovers and innovation in high-tech firms in emerging economies. Journal of International Business Studies, 41(7): 1183–1197.Google Scholar
Lu, J., & Tao, Z. 2009. Trends and determinants of China's industrial agglomeration. Journal of Urban Economics, 65(2): 167–180.Google Scholar
Lu, Q. 2000. China's leap into the information age: Innovation and organization in the computer industry. New York: Oxford University Press.Google Scholar
Maine, E. M., Shapiro, D. M., & Vining, A. R. 2010. The role of clustering in the growth of new technology-based firms. Small Business Economics, 34(2): 127–146.Google Scholar
Marshall, A. 1890. Principles of economics. London: Macmillan.Google Scholar
Mathews, J. A. 2002. Competitive advantages of the latecomer firm: A resource-based account of industrial catch-up strategies. Asia Pacific Journal of Management, 19(4): 467–488.Google Scholar
Meyer, K. E., & Sinani, E. 2009. When and where does foreign direct investment generate positive spillovers? A meta-analysis. Journal of International Business Studies, 40(7): 1075–1094.Google Scholar
Mudambi, R. 2008. Location, control and innovation in knowledge-intensive industries. Journal of Economic Geography, 8(5): 699–725.CrossRefGoogle Scholar
Parisi, M. L., Schiantarelli, F., & Sembenelli, A. 2006. Productivity, innovation and R & D: Micro evidence for Italy. European Economic Review, 50(8): 2037–2061.Google Scholar
Peng, M. W., Tan, J., & Tong, T. W. 2004. Ownership types and strategic groups in an emerging economy. Journal of Management Studies, 41(7): 1105–1129.CrossRefGoogle Scholar
Porter, M. E. 1990. The competitive advantage of nations. New York: Free Press.Google Scholar
Pouder, R., & St. John, C. H. 1996. Hot spots and blind spots: Geographical clusters of firms and innovation. Academy of Management Review, 21(4): 1192–1225.Google Scholar
Prahalad, C., & Lieberthal, K. 1998. The end of corporate imperialism. Harvard Business Review, 76(4): 69–78.Google Scholar
Raghunathan, S. P. 1995. A refinement of the entropy measure of firm diversification: Toward definitional and computational accuracy. Journal of Management, 21(5): 989–1002.Google Scholar
Romer, P. M. 1986. Increasing returns and long-run growth. Journal of Political Economy, 94(5): 1002–1037.Google Scholar
Saxenian, A. L. 1991. The origins and dynamics of production networks in Silicon Valley. Research Policy, 20(5): 423–437.Google Scholar
Scherer, F. M. 1982. Inter-industry technology flows and productivity growth. The Review of Economics and Statistics, 64(4): 627–634.Google Scholar
Spencer, J. W. 2008. The impact of multinational enterprise strategy on indigenous enterprises: Horizontal spillovers and crowding out in developing countries. Academy of Management Review, 33(2): 341–361.Google Scholar
Tallman, S., Jenkins, M., Henry, N., & Pinch, S. 2004. Knowledge, clusters, and competitive advantage. Academy of Management Review, 29(2): 258–271.Google Scholar
Zaheer, S. 1995. Overcoming the liability of foreignness. Academy of Management Journal, 38(2): 341–363.Google Scholar
Zhang, Y., & Li, H. 2010. Innovation search of new ventures in a technology cluster: The role of ties with service intermediaries. Strategic Management Journal, 31(1): 88–109.Google Scholar
Zhang, Y., Li, H., Li, Y., & Zhou, L. A. 2010. FDI spillovers in an emerging market: The role of foreign firms' country origin diversity and domestic firms' absorptive capacity. Strategic Management Journal, 31(9): 969–989.CrossRefGoogle Scholar
Zhou, C., & Li, J. 2008. Product innovation in emerging market-based international joint ventures: An organizational ecology perspective. Journal of International Business Studies, 39(7): 1114–1132.Google Scholar
Zucker, L. G., Darby, M. R., & Brewer, M. B. 1998. Intellectual human capital and the birth of US biotechnology enterprises. American Economic Review, 88(1): 290–306.Google Scholar