The impact of foreign direct investment on labour productivity in the Chinese electronics industry

Abstract

Foreign direct investment (FDI) may have a positive impact on labour productivity in recipient industries through direct introduction of capital, technology and management skills and indirectly through spillover effects on domestic firms. This study uses a model intended to examine the overall effects of inward FDI in the Chinese electronics industry. A panel data set is used for 41 sub-sectors of the industry in 1996 and 1997 having differing levels of FDI. Labour productivity is modelled as dependent on the degree of foreign presence in the industry and other variables, namely capital intensity, human capital and firm size for scale factors. Various econometric estimation techniques for panel data are compared to obtain an appropriate statistical model. The results suggest that foreign presence in the industry was associated with higher labour productivity.

Technological spillovers and industrial growth in Chinese regions

“…This formulation has been used by numerous authors in measuring FDI spillovers (Liu et al, 2001;Wei and Liu, 2006;Cheung and Lin, 2004).…”

“…From the industrial perspective, researchers find a significant and positive relationship between FDI and Chinese industrial development (Liu and Buck, 2007;Liu et al, 2001;Liu, 2002;Liu and Wang, 2003;Gao, 2004) 10 . Hu and Jefferson (2002) point out that FDI has a strong positive impact on the productivity of the firms directly receiving FDI, but that the spillover effects from FDI in an industry are negative for its domestic firms.…”

“…9 They suggest that both types of firms (SOEs and other locally owned firms) benefit more in technology-intensive industries than in labour-intensive industries. 10 The focuses of these researchers are different: Liu and Buck (2007) focus on high-tech industrial sectors, Liu et al (2001) on Chinese electronics industry, while Liu (2002), Liu and Wang (2003) and Gao (2004) on general manufacturing/industrial sectors.…”

Foreign direct investments, environmental externalities and capital segmentation in a rural economy

“…In the first place, FDI increases capital accumulation in the receiving country by introducing new inputs and technologies (Dunning, 1993;Blomstrom et al, 1996;Borensztein et al, 1998;Saggi, 2002;Kemeni, 2010). In the second place, it tends to raise the level of knowledge and skills in the host country through labor and manager training (de Mello, 1996(de Mello, , 1999Liu et al, 2001;Hansen and Rand, 2006). In the third place, FDI can increase competition in the host country industry by overcoming entry barriers and reducing the market power of existing firms (Chung, 2001;Bitzer and Görg, 2009;Nicolini ad Resmini, 2010;Damijan et al, 2013).…”

Foreign Direct Investment, Technology Diffusion, and Host Country Productivity Growth

“…Inward FDI in the People's Republic of China (PRC) is the center of research attention (Coe, Helpman, and Hoffmaister 1997;Li, Liu, and Parker 2001;Liu et al 2001;Wei and Liu 2001;Buckley, Clegg, and Wang 2002;Hu and Jefferson 2002;Liu 2002;Huang 2004). The common factor in these studies is that the absorption capacity of the host country performs a critical role in the efficacy of FDI spillover.…”