Export spillovers from foreign invested enterprises and export market extension of domestic enterprises
ZHU Shengjun1(),HU Xuqian1,2,HE Canfei1,2()
1. College of Urban and Environmental Sciences, Peking University, Beijing 100871, China 2. Peking University-Lincoln Institute Center for Urban Development and Land Policy, Peking University, Beijing 100871, China
Since the economic reforms of the late 1970s, foreign invested enterprises have contributed much to China's economic development and local business growth. Based on the export information of China Customs from 2001 to 2011, this paper constructs the balance panel data at city-product-destination scale. Using the Conditional Logit method, this paper explores the spillover effect of China's foreign invested enterprises on export decision-making of domestic enterprises. The empirical results show that there is a significantly positive spillover effect on the export decision of domestic enterprises. This paper also analyzes the heterogeneity of export destinations and export cities. Results show that the export spillover effect of foreign invested enterprises is more significant when there exist large economic, geographical, political or institutional distances between the export destinations and China. The spillover effect of China's central and western cities is more significant than that of eastern cities. The results of this paper illustrate that the export activities of foreign invested enterprises can play an important role in helping the domestic enterprises develop new foreign markets.
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China's export structure has shown a rapid shift towards more sophisticated industries. While some believe that this trend is a result of processing trade and foreign direct investment, the evidence is mixed. This paper examines variations in level of export sophistication across China's manufacturing industries. We find that an industry's level of export sophistication is positively related to the share of wholly foreign owned enterprises from OECD countries and the share of processing exports of foreign-invested enterprises, and negatively related to the share of processing exports of indigenous Chinese enterprises. Evidence from the relative export prices of Chinese goods, which measure within-product export sophistication, shows a similar pattern.
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Multinational firms are important conduits of managerial skills, foreign market linkages, and technology. Foreign export spillovers associated with multinational firms have the potential to reduce entry costs for local exporting firms. This paper examines whether exports by multinational firms increase the probability of exporting by domestic Chinese firms. The findings from the Probit estimation highlight the varying relationships between multinational exports and local foreign entry based on the type of ownership. The results from separating foreign-invested enterprises into overseas Chinese companies and OECD-based multinational firms suggest that the export activity of the former does not increase the probability of exporting by local firms, whereas the latter positively influence the export decision of local firms, particularly under processing trade.
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Abstract. This paper studies the relationship between multinational firm proximity and the formation of new export connections by private Chinese exporters between 1997 and 2003. The results indicate that growth in the presence of multinational firms is positively associated with the formation of new trade by local Chinese firms. Further exploration suggests that information spillovers may drive this result, as the positive association due to own-industry multinational presence is particularly strong in contexts where information improvements may be the most helpful. Thus, it appears that a growing presence of multinational firms may enhance the export capabilities of local domestic firms.
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Significant research is needed in the design and implementation of outward-looking development strategies, recognizing that the supply response must come from individual firms. However, in studying industrial development policy issues, one often become over-influenced by a preconceived model, leaving out the most critical aspect, i.e. real world experience in the intricacies of the industrial development process in low-income countries. The approach taken here gives the highest priority to finding the real stories on the development process at the firm or factory level. In all the cases reviewed, the most critical ingredient for successful entry in the international markets was nearly always the presence of foreign and/or domestic catalysts. The catalyst model of development that emerges from the analysis of eleven export success stories aims at providing feasible and practical answers to questions about workable development strategies for low-income countries. To that end, the catalyst model of development is a model for initiating and transmitting outward-oriented development and for sequencing realistic policy reforms, starting from
GreenawayD, SousaN, WakelinK.Do domestic firms learn to export from multinationals?. , 2004, 20(4): 1027-1043.http://linkinghub.elsevier.com/retrieve/pii/S0176268003001034
Attracting inward investment is a major preoccupation of policymakers worldwide, and a wide range of instruments, including direct subventions, are deployed to attract multinational enterprises (MNEs). Intervention is predicated on the assumption that there are direct productivity spillovers associated with the presence of MNEs and the policy of attracting them is targeted at capturing these externalities. Yet robust evidence on direct spillovers is hard to find. An underexplored indirect channel for productivity spillovers is via exports. Exporting firms are more productive than nonexporting firms. Thus, if the presence of MNEs results in more indigenous firms exporting, an indirect productivity spillover will result. In this paper, we identify possible transmission mechanisms for export spillovers and test for their existence on a large panel of firms in the UK. Our results confirm positive spillover effects from MNEs on the decision to export of UK-owned firms as well as on their export propensity.
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In this paper we investigated the hypothesis of export spillovers from foreign multinationals to domestic firms using a data set of UK manufacturing firms from 1992 to 1999. Unlike previous studies we allow not only for the possibility of horizontal (i.e. intra-industry) and regional externalities, but also for vertical ones (i.e. inter-industry: forward and backward). Deploying and Heckman selection process we modelled the two decisions of whether to export or not, and how much to export, separately. The results indicate that the decision to start exporting is positively associated with the presence of foreign firms in the same industry and region; furthermore export oriented foreign affiliates seem to be the source of stronger export spillovers. The decision concerning how much to export is affected positively by foreign firms in downstream industries and by those in the same industry and region that do not export.
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Should economies that promote themselves as export platforms for FDI be expected to experience relatively high levels of export spillovers from foreign to host-country enterprises? To investigate how export decisions of host-country enterprises are associated with the presence and export intensity of foreign-owned enterprises (FOEs) in an export-platform economy we use enterprise-level data for the manufacturing sector in Ireland. We postulate that export spillovers from FOEs are dependent upon the sectoral presence and export intensity of FOEs, so that third country export-platform FDI may not result in positive export spillovers to host-country enterprises. We find that the decision by host-country enterprises to enter the export market is positively associated with the presence of FOEs in their sector. However, the export intensity of host-country enterprises is negatively associated with the export sales ratios of FOEs, a result that contrasts with evidence of positive FOE export intensity spillovers in most previous empirical studies. Classification-
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In this paper, the effect of proximity to multinational exporters on the creation of new export linkages (the extensive margin of trade) is debated. Using panel data from Chinese customs for 1997-2007, the capacity for Chinese domestic firms to begin exporting new varieties to new markets is shown to respond positively to the export activity of neighboring foreign firms. These spillovers are shown to be product and country specific. This conclusion is robust to fixed effects and instrumental variable specifications that control for both supply and demand shocks that could bias the estimations. The impact is sizable. The marginal impact of product-country-specific foreign export spillovers is five times as large as the effect of a 10 percent increase in the demand for the product in the destination country. Foreign export spillovers are also shown to be primarily limited to ordinary trade activities. Overall, our findings suggest that even for a country with an important cost-advantage such as China, there is room for initiatives from policy-makers that will diffuse best practices regarding export experience among exporters.
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Abstract This paper has two main objectives: first, to consider country specific determinants that attract services FDI, and second, to compare the importance of these determinants vis- -vis traditional determinants that attract manufacturing FDI. Using OECD countries as our sample, and 1980 to 2003 as our time period, we consider the determinants of inward FDI in a panel setting. Our results provide empirical evidence to support the view that no new theories may be necessary to explain the determinants of services FDI. Copyright 2010 Blackwell Publishing Ltd.
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Chinese outward foreign direct investment (FDI) has increased substantially in recent years. Though this has generated considerable interest in the motivations and drivers of Chinese investment abroad, there have been few systematic empirical studies of these questions. This paper performs an econometric analysis of the host country determinants of Chinese outward FDI in the period 2003鈥2006. We find that Chinese outward FDI is attracted to large markets, and to countries with a combination of large natural resources and poor institutions. Disaggregation shows that the former effect is related to OECD countries, whereas the latter interaction effect holds for non-OECD countries.
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This article extends the homophily principle (similarity breeds connection) found in many social networks to the study of global trade. Using a large data set about global bilateral trade from 1950 through 2000, analyzed by the gravity model borrowed from international economics, this study identifies increased geographic and cultural homophily in global trade, suggesting that countries increasingly favor their geographically and culturally proximate counterparts in global trade. Another analysis of bilateral trade data at the sector level produces an explanation for this observed intensification of geo-cultural homophily. The technological and institutional improvements facilitate disintegration of productive activities and product differentiation, thereby intensifying geo-cultural homophily in the intermediate input and finished manufacture sectors; moreover, trade expansion in these geo-culturally sensitive sectors outpaces geo-culturally less sensitive sectors such as the raw material sector. This differential expansion of trade across sectors shifts the composition of the overall global trade and makes it more subject to geo-cultural influences. Taken together, global trade has become more geo-culturally embedded. Instead of eliminating geo-cultural homophily in global economic activities, ironically, the improved technologies provide better conditions for it to materialize and grow.
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The estimated coefficient of distance on the volume of trade is generally found to increase rather than decrease through time using the traditional gravity model of trade. This distance puzzle proved robust to several ad hoc versions of the model using data for 1962-96 for a large sample of 130 countries. The introduction of an "augmented" barrier to trade function removes the paradox, yielding a decline in the estimate of the elasticity of trade to distance of about 11 percent over the 35-year period for the whole sample. However, the "death of distance" is shown to be largely confined to bilateral trade between rich countries, with poor countries becoming marginalized.
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Gravity equations have been widely used to infer trade flow effects of various institutional arrangements. We show that estimated gravity equations do not have a theoretical foundation. This implies both that estimation suffers from omitted variables bias and that comparative statics analysis is unfounded. We develop a method that (i) consistently and efficiently estimates a theoretical gravity equation and (ii) correctly calculates the comparative statics of trade frictions. We apply the method to solve the famous McCallum border puzzle. Applying our method, we find that national borders reduce trade between industrialized countries by moderate amounts of 20-50 percent.
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This study addressed the question of whether firms in a competitive, globally integrated environment face a "liability of foreignness" and to what extent either importing home-country organizational capabilities or copying the practices of successful local firms can help them overcome this liability. Predictions were tested with a paired sample of 24 foreign exchange trading rooms of major Western and Japanese banks in New York and Tokyo. Results support the existence of a liability of foreignness and the role of a firm's administrative heritage in providing competitive advantage to its multinational subunits. They also highlight the difficulty firms face in copying organizational practices from other firms.
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Many economic researchers have attempted to measure the effect of aggregate market or public policy variables on micro units by merging aggregate data with micro observations by industry, occupation, or geographical location, then using multiple regression or similar statistical models to measure the effect of the aggregate variable on the micro units. The methods are usually based upon the assumption of independent disturbances, which is typically not appropriate for data from populations with grouped structure. Incorrectly using ordinary least squares can lead to standard errors that are seriously biased downward. This note illustrates the danger of spurious regression from this kind of misspecification, using as an example a wage regression estimated on data for individual workers that includes in the specification aggregate regressors for characteristics of geographical states.
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ABSTRACT Inference methods that recognize the clustering of individual observations have been available for more than 25 years. Brent Moulton (1990) caught the attention of economists when he demonstrated the serious biases that can result in estimating the effects of aggregate explanatory variables on individual-specific response variables. The source of the downward bias in the usual OLS standard errors is the presence of an unobserved, state-level effect in the error term. More recently, John Pepper (2002) showed how accounting for multi-level clustering can have dramatic effects on t statistics. While adjusting for clustering is much more common than it was 10 years ago, inference methods robust to cluster correlation are not used routinely across all relevant settings. In this paper, I provide an overview of applications of cluster-sample methods, both to cluster samples and to panel data sets. Potential problems with inference in the presence of group effects when the number of groups is small have been highlighted in a recent paper by Stephen Donald and Kevin Lang (2001). I review different ways of handling the small number of groups case in Section III.