International joint ventures and technology diffusion: Evidence from China

Abstract

This paper investigates international technology diffusion through FDI by explicitly considering the ownership structure of FDI projects with detailed Chinese data. We find that international joint ventures (JVs) generate significantly positive technology diffusion effects, while wholly foreign‐owned firms (WFOs) generate significantly negative competition effects. The differentiated impacts of JVs and WFOs are robust, heterogeneous and causal as shown by our instrumental variable estimation. As for the mechanisms, evidence suggests that JVs bring better technology to the host country, invest more in R&D and employee training, and also provide easier technology access to local firms than WFOs.

Demystifying the role of internal dynamics in the path of innovative competitiveness: a serial mediation model of international joint ventures

“…Despite being an extremely robust organizational form that offers diverse success prospects (Liu et al , 2020), IJVs have witnessed exorbitant failure rates globally (Evans, 2006; Nippa and Reuer, 2019). Researchers are increasingly focusing on the reasons for IJV failure and possible termination and exit strategies (Nemeth and Nippa, 2013).…”

The Economic Rise of China – An Integrated Analysis of China’s Growth Drivers

“…in the automotive industry) has led to the transfer of technological know-how (e.g. Liu et al, 2020). As Chinese employees moved down the learning curve, product quality improved and manufacturing processes became more efficient.…”

The impact of foreign direct investment on innovation at domestic firms: Evidence from the deregulation of foreign investment in China

“…Previously we focused on the effect of horizontal and technologically close FDI. Many researchers have documented positive spillover to the TFP of domestic firms and patent applications from vertical FDI (Blalock and Gertler 2008; Fons‐Rosen et al 2017; Havranek and Irsova 2011; Javorcik 2004, 2008; Liu et al 2009; Liu et al 2019; Lu et al 2017). Vertical FDI might confound our estimates of technologically close FDI because in our narrowly defined four‐digit sectors, the technology domain distribution of upstream and downstream industries might resemble that in the horizontal industry.…”

“…Based on the official definition, new products embody new technologies, new design concepts, or certain innovations regarding the structure, material, or production processes, which significantly improve the original product, enhance its performance or expand its functions. The indicator is widely used as a measure of innovation in China, including in Lu et al (2017) and Liu et al (2019). Among the 1,296,055 observations in our sample, only 8% of them reported above‐zero new product sales; therefore, we believe new product share constitutes a valid measure of firms' absorptive capacity.…”