PRC Outward Investment in the USA and Europe: A Model of R&D Acquisition

Abstract

In this paper, I present a theoretical framework designed to explain People's Republic of China (PRC) outward foeign direct investment in the USA and Europe, in search of research and development (R&D) acquisition modeled as positive “spillover effects” in a two‐country model with firms distinguished by their ability to innovate. The motivation for this paper is the growing PRC merger and acquisition activity in Europe and the USA. The fact that the PRC, despite its many successful internal reforms, cannot induce innovation activity designed to alter its external sector from one that is based on cheap labor to one that is based on innovation‐rich products, has forced it to use its extensive reserve holdings to acquire the necessary R&D via merger and acquisition. These acquisitions will allow the PRC to alter their domestic and export product mix and thus avoid the middle‐income trap.

Role of Domestic Financial Reforms and Internationalization of Non-Financial Transnational Firms: Evidence from the Chinese Market

“…Hence, allowing domestic firms to list internationally enables them to have access to international resources. As Desbordes and Wei [14], Pelzman [22], and Rugman and Li [23] explain, Chinese firms-regardless of successful internal reforms-have failed to induce innovations in production, such as switching from cheap, labor-based production to an innovation and technology based production system, and prefer merger-acquisitions as a means of acquiring the required R&D. Therefore, this study also presumes that even if they are part of a successful internationalization process, some Chinese firms will fail to sustain their growth or grow further in the future. Figure 1 shows the outward investment trends of China and other major economies over time.…”

Measuring the provincial supply of higher education institutions in China

“…However, a large body of studies has advanced an academic debate of the several junctures that the PRC approaches in its transition from a middle-towards a high-income nation. According to the literature, its avoidance of a middle-income trap could be determined by technological development and innovation (Chen et al, 2020;Fu, Woo, & Hou, 2016;Liu, Serger, Tagscherer, & Chang, 2017;Pelzman, 2015;Zeng & Fang, 2014), income inequality (Li, 2017;Liu, Li, Wang, & Zhou, 2015), financial liberalization (Yao, 2015;Yiping, Qin, & Xun, 2014), political and structural adjustments (Feng, 2015;McKinney, 2018;Schweinberger, 2014;Shambaugh, 2018;Xu & Wang, 2017), and educational development (Wang, Li, Abbey, & Rozelle, 2018). The importance of education for economic growth and development has been widely recognized in the literature.…”

International R&D Collaboration and Strategic Trade Policy

“…There is increasing attention on the issues of R&D investment/collaboration and international trade, reflected by a flurry of papers published in this journal, e.g. Todo et al (2011), Garcia-Vega and Huergo (2011), Cui et al (2014, Pelzman (2015), etc. Our work can be regarded as a simplified version of the oligopolistic intra-industry trade models of Anderson et al (1989) and Cordelia (1993), in the sense that we only allow completely symmetric setting between countries.…”