Abstract
This paper assesses the spillover effects of inward foreign direct investment (FDI) on firm-level productivity growth in China’s manufacturing sector over the period 2006–2009. We use a detailed industrial classification of data to characterise both intra-industry and interindustry linkages, in contrast to most previous studies for develo** countries. Our findings suggest that there is a negative short-term effect and a positive long-run effect from FDI at both linkage levels. Among the interindustry linkages, in line with previous studies, the backward linkage is an important channel for domestic firms to obtain technology spillovers in the long run. However, our results also indicate that forward linkages are equally important, as we find a strongly positive impact of this linkage on productivity growth of domestic manufacturing firms in China.
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Notes
- 1.
The firms are only foreign owned with a minimum of 25% foreign capital to total assets.
- 2.
The price index of investment in fixed assets is not available for Tibet. Therefore, the average national level is used for deflating the data of the firms located in Tibet.
- 3.
The 135 sectors input-output matrix cannot be strictly treated as a three-digit level classification. However, it provides at least a better classification than the 42 sectors which is two-digit level classification.
- 4.
However, imported intermediation products should be excluded from the calculation but the input-output matrix which excludes such imports does not exist.
- 5.
We consider both situations, namely, inclusive of exports and exclusive of exports, and the results are found to be fairly robust.
- 6.
Data limitations (insufficient annual export records at firm level) do not permit removal of the export outflows precisely. The only way to remove the outflows of export is to assume that each firm in the same industry has an exactly same behaviour towards exports, allowing for the use of the industrial average proportion.
- 7.
At this point, it is appropriate to point out that it is not correct to simply divide the coefficient on the interaction term, for example, horizontal*time by the coefficient of horizontal variable to obtain the length of time it takes for the positive rate effect to overcome the negative level effect. As emphasised by Brambor et al. (2006), it is important to calculate the corresponding standard errors for obtaining the correct marginal effect of the spillover variables. Accordingly, from here on, Figs. 15.1, 15.2, and 15.3 are used to illustrate the marginal effects with 95% confidence intervals, to gauge the time period it takes for the net positive effect to emerge from the results.
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Appendix I
Appendix I
Three-digit Chinese SIC code | Industries |
|---|---|
131 | Grain grinding industry |
132 | Feed processing industry |
133 | Vegetable oil processing industry |
134 | Sugar industry |
135 | Slaughtering and meat processing industry |
136 | Fishery processing industry |
137/139 | Other food processing |
143 | Convenience food manufacturing |
144 | Liquid milk and milk products manufacturing |
146 | Condiments, fermentation products manufacturing |
141/142/145/149 | Other food manufacturing |
151/152 | Alcohol and wine manufacturing |
153/154 | Soft drinks and tea processing industry |
161/162/169 | Tobacco industry |
171 | Cotton, chemical fibre textile and dyeing industry |
172 | Weaving and dyeing fine processing industry |
173/174 | Linen textile, silk spinning and fine processing industry |
175 | Textile goods manufacturing |
176 | Knitwear and woven products manufacturing |
181/182/183 | Garment, shoes and hats manufacturing |
191/192/193/194 | Leather, fur, and feathers manufacturing |
201/202/203/204 | Wood processing and wood, bamboo, cane, palm and grass products |
211/212/213/214/219 | Furniture manufacturing |
221/222/223 | Papermaking and paper products industry |
231/232/233 | Duplicating industry of printing and recording medium |
241/242/243/244/245 | Cultural educational and sports goods manufacturing |
251/253 | Oil and nuclear fuel processing industry |
252 | Petroleum processing and coking |
261 | Basic chemical raw materials manufacturing |
262 | Fertilizer manufacturing |
263 | Pesticide manufacturing |
264 | Coatings, printing ink, paint and similar products manufacturing |
265 | Synthetic materials manufacturing |
266 | Special chemical products manufacturing |
Three-digit Chinese SIC code | Industries |
|---|---|
267 | Daily-use chemical products manufacturing industry |
271/272/273/274/275/276/277 | Pharmaceutical industry |
281/282 | Chemical fibre manufacturing |
291/292/293/294/295/296/299 | Rubber products industry |
301/302/303/304/305/306/307/308/309 | Plastic product industry |
311 | Cement, lime and gypsum manufacturing |
312 | Cement and gypsum products manufacturing |
313 | Brick, stone and other building materials manufacturing |
314 | Glass and glass products manufacturing |
315 | Ceramic products manufacturing |
316 | Refractory products manufacturing |
319 | Graphite and other non-metallic mineral products manufacturing |
321 | Iron-making industry |
322 | Steel manufacturing |
323 | Steel rolling processing industry |
324 | Ferroalloy smelting industry |
331/332/333/334 | Smelting non-ferrous metal and alloy manufacturing |
335 | Non-ferrous metal rolling processing |
341/342/343/344/345/346/347/348/349 | Metal products manufacturing |
351 | Boiler and prime mover manufacturing |
352 | Metal processing machinery manufacturing |
353 | Lifting transportation equipment manufacturing industry |
354 | Pumps, valves, compressors and similar machinery manufacturing |
355/356/357/358/359 | Other common equipment manufacturing |
361 | Mining, metallurgy, building special equipment manufacturing |
362 | Chemical, wood, non-metal processing special equipment manufacturing |
367 | Agriculture, forestry and fishing special-purpose machinery manufacturing |
363/364/365/366/368/369 | Other special equipment manufacturing |
371 | Railway transportation equipment manufacturing industry |
372 | Automobile manufacturing |
375 | Ships and floating device manufacturing |
373/374/376/379 | Other transportation equipment manufacturing industry |
391 | Electric manufacturing |
Three-digit Chinese SIC code | Industries |
|---|---|
392 | Transmission, distribution and control equipment manufacturing |
393 | Wire, cable, fibre optic cable and electrical equipment manufacturing |
395/396 | Household electricity and the electric appliance manufacturing industry |
394/397/399 | Other electrical machinery and equipment manufacturing |
401 | Communication equipment manufacturing industry |
402/403 | Radar and radio equipment manufacturing |
404 | Electronic computer manufacturing |
405/406 | Electronic components manufacturing |
407 | Home audio and video equipment manufacturing |
409 | Other electronic equipment manufacturing industry |
411/412/413/414/419 | Instrument manufacturing |
415 | Culture and office machinery manufacturing |
421/422/423/424/429 | Craftwork and other manufacturing |
431/432 | Waste processing industry |
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Li, C., Tanna, S. (2018). FDI Spillover Effects in China’s Manufacturing Sector: New Evidence From Forward and Backward Linkages. In: Tsounis, N., Vlachvei, A. (eds) Advances in Panel Data Analysis in Applied Economic Research. ICOAE 2017. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-70055-7_15
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