Kiel Working Papers, Kiel Institute for World Economics
No 1400:
Foreign direct investment, access to finance, and innovation activity in Chinese enterprises
Sourafel Girma, Yundan Gong and Holger Görg
Abstract: This paper investigates the link between inward FDI and
innovation activity in China, using a very comprehensive and recent firm
level database. We pay particular attention to the impact of domestic
access to finance. Our results show that firms with foreign capital
participation or those with good access to domestic bank loans innovate
more than others do. We also find that inward FDI at the sectoral level is
positively associated with domestic innovative activity only if firms
engage in own R&D or if they have good access to domestic finance. However,
access to finance only plays a role for private or collectively owned
firms, less so for state-owned enterprises. Furthermore, we distinguish the
effect of sector level inward FDI into technology transfer and FDI
affecting domestic credit opportunities and find that the latter is of very
little significance for SOEs and is also independent of their access to
finance. By contrast, it is an important channel through which FDI affects
the innovation of domestic private and collectively owned enterprises.
Keywords: FDI, finance, China; (follow links to similar papers)
JEL-Codes: O31,; F23,; G32; (follow links to similar papers)
26 pages, February 2008
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