• Cultural Proximity and Local Firms’ catch up with Multinational Enterprises

      Wang, J.; Liu, X.; Wei, Yingqi; Wang, Chengang (2014-08)
      Integrating and extending new growth theory and resource-based views, this paper provides a theoretical foundation for the catch-up hypothesis. It examines the role of technology gap, technological capability, and cultural proximity in local firms’ catch-up with MNEs. Hypotheses are developed and tested with a dynamic model on a large firm-level panel dataset from Chinese manufacturing. The results confirm that catch-up is positively related to technology gap and technological capability. Furthermore, in the presence of cultural proximity, the speed of local Chinese firms’ catch-up with MNEs from Hong Kong, Macau, and Taiwan is not significantly lower than that with other MNEs.
    • The delicate balance: Managing technology adoption and creation in multinational affiliates in an emerging economy

      Liu, X.; Vahtera, P.; Wang, Chengang; Wang, J.; Wei, Yingqi (2016-11)
      From a perspective of the resource-based view, this paper analyses the inter-connection between technology adoption and creation in affiliates of multinational enterprises (MNEs) in an emerging economy. Operating below the international technological frontier, multinational affiliates are more motivated to adopt technologies already existent from their MNEs than create new technologies, as the former already gives them competitive advantages over local firms. When technology creation is required, multinational affiliates will adopt further technology-based resources from their MNEs as they are unavailable in an emerging economy. As a result, technology adoption is a necessary but not sufficient condition for multinational affiliates to conduct technology creation. Given that networks are particularly important for working around institutional voids in the context of an emerging economy, this paper also investigates the different roles of R&D support from internal and external networks of multinational affiliates in technology adoption and creation. Hypotheses are tested and partially supported based on unique data from 465 multinational affiliates in China.
    • Do local manufacturing firms benefit from transactional linkages with multinational enterprises in China?

      Liu, X.; Wang, Chengang; Wei, Yingqi (2009)
      This paper examines the linkage effects of foreign direct investment (FDI) on firm-level productivity in Chinese manufacturing. It is found that FDI generates positive vertical linkage effects in Chinese manufacturing at both the national and regional levels, and limited positive horizontal spillovers at the regional level. While OECD firms gain from both vertical and (probably) horizontal linkages, Hong Kong, Macao and Taiwanese firms benefit only from backward linkage effects. In the domestic sector, in which we are most interested, both state-owned enterprises (SOEs) and non-SOEs are hurt by competition from foreign firms in the same industries. While SOEs gain from vertical linkages with foreign firms, non-SOEs are unable to do so. The patterns of productivity spillovers from FDI in Chinese manufacturing seem to be determined by one key factor ¿ the technological capabilities of the firms involved. Important data limitations and policy implications of this research are discussed.
    • Does foreign direct investment facilitate technological progress? Evidence from Chinese industries

      Liu, X.; Wang, Chengang (2003)
      This paper studies the impact of foreign direct investment (FDI) on total factor productivity (TFP) for a cross sectional sample of Chinese industrial sectors. The possible determinants of TFP are sought with special focus on FDI. An endogeneity test is performed in order to avoid inconsistent results. Evidence indicates that foreign presence, the level of R&D and the firm size are the most important factors enhancing TFP in Chinese industries. The findings from this study support the argument that attracting FDI is an effective way of introducing advanced technology to host countries.
    • Entry modes of foreign direct investment in China: A multinomial logit approach

      Wei, Yingqi; Liu, B.; Liu, X. (2005-11)
      The existing empirical literature on foreign direct investment (FDI) entry strategies tends to allow a binary choice between wholly owned enterprises (WOEs) and equity joint ventures (EJVs) or between greenfield investment and acquisition only. The current study specifies a multinomial logit model for the choice from all four FDI entry modes in China. Five hypotheses are developed based on transaction cost economics and tested on a data set covering 10,607 foreign investment projects in China. A foreign investor seems to prefer the WOE mode given its large investment commitment, a high level of the host country's experience in attracting FDI, a good specific industrial location, and a high asset intensity in the host industry. If the conditions of host country experience and good specific location are not met, the EJV and the joint stock company (JSC) modes seem to be of greater use. A good specific location also makes the contractual joint venture (CJV) a preferable entry mode. Compared with overseas Chinese investors from Hong Kong, Macao, and Taiwan, other foreign investors prefer EJVs over WOEs and CJVs. The results have important implications for managers.
    • Impact of openness on economic growth in different country groups.

      Wang, Chengang; Liu, X.; Wei, Yingqi (2004)
      This paper evaluates the impact of openness on growth in different country groups using a panel of 79 countries over the period 1970-98. It distinguishes itself from many existing studies in three aspects: Firstly, both trade and FDI are included as measures of openness. Secondly, countries are classified into high-, middle- and low-income groups to compare the roles of trade and FDI in these groups. Thirdly, the possible problems of endogeneity and multicollinearity of trade and FDI are carefully dealt with in a panel data setting. The main findings are as follows. Total trade has a general positive impact on growth in all country groups, although the impact from imports is not significant in high-income countries. FDI has a positive impact on growth in high- and middle-income countries, but not in low-income countries. With the existing absorptive capabilities, low-income countries can benefit from both exports and imports, but not from FDI. These findings suggest that trade and FDI affect growth through different channels and under different conditions. The paper also discusses important policy implications.
    • Mutual productivity spillovers between foreign and local firms in China

      Wei, Yingqi; Liu, X.; Wang, Chengang (2008)
      The existing literature treats advanced technology sourcing as the only cause of reverse productivity spillovers from local to foreign firms and implies that mutual spillovers between foreign and local firms can only happen in the developed world. This paper argues that the diffusion of indigenous technology and local knowledge helps the productivity enhancement of multinationals, so that there can be mutual spillovers even in a developing country. The results from a large-sample firm-level econometric analysis and a comparative case study of seven companies in Chinese manufacturing support this new argument, as mutual spillovers are identified between local Chinese firms and overseas Chinese or OECD-invested firms.
    • Simultaneous Impact of the Presence of Foreign MNEs on Indigenous Firms’ Exports and Domestic Sales

      Wang, J.; Wei, Yingqi; Liu, X.; Wang, Chengang; Lin, H. (2014-04)
      Incorporating the global production network approach and competitor analysis, this paper establishes an analytical framework with two hypotheses for the role of foreign multinational enterprises (FMNEs) in indigenous firms’ exports and domestic sales. First, the presence of FMNEs as a whole is likely to have a negative impact on indigenous firms’ domestic sales but a simultaneous positive impact on their exports in an emerging economy like China. Second, the presence of MNEs from Hong Kong, Macau and Taiwan (HMT MNEs) is more likely to generate this pattern of impact than MNEs from other countries (Other FMNEs). The FDI-led export strategy contributed to the dominance of the scenario described by the first hypothesis in China, while a higher degree of market commonality and resource similarity of HMT MNEs with that of indigenous Chinese firms than Other FMNEs leads to the second hypothesis. These novel hypotheses are tested and supported by a very large and recent firm-level panel dataset from Chinese manufacturing.
    • The trade development path and export spillovers in China: A missing link.

      Buck, T.; Liu, X.; Wei, Yingqi; Liu, X. (2007)
      A two-step modelling strategy is applied to a panel of 5,861 foreign-invested and 7,697 indigenous Chinese firms for the period 1998¿2001 to investigate whether export spillovers may represent a mechanism underpinning Dunning¿s Trade Development Path hypothesis. ¿ Such spillovers are found, and the results emphasize the importance of a wide spectrum of spillover channels involving labour mobility, spatial agglomeration, technological imitation and the diffusion of exporting experience. ¿ Multinational enterprises in China positively affect local Chinese firms¿ exports through various spillover channels, and inward FDI brings significant, indirect spillovers.