MNEs, internationalization of R&D and the impact on local firms: Evidence from China's high-tech industries

This study examines the impact of FDI and foreign-owned Research and Development (R&D) on total factor productivity (TFP) of domestic firms in China's high-tech industries. Growth in local firm's TFP is modeled as being dependent on the local firm's distance in technology space to foreign affiliates in the same industry, along with R&D, both foreign-owned and domestic. This model is tested on small-sampled industry-level data for China for the period of 1997-2003, using a within estimator, panel data approach. The results show that the technology gap has a significantly positive relation to the improvement of domestic TFP growth productivity at the industry level. However, we do not find strong positive effect of foreign-owned R&D on improving local productivity. Domestic firms' own R&D, by contrast, is a significant determinant for local industry's productivity enhancement.local total factor productivitystatus: publishe