Working Paper No. 708

FDI, Market Structure and R&D Investments in China

Published: June 21, 2007Pages: 30Keywords: China; FDI; Competition; R&DJEL-codes: F23, L11, O31

FDI, Market Structure and R&D Investments in China Nannan Lundin, Fredrik Sjöholm, Ping He and Jinchang Qian


FDI can be an important channel for developing countries’ ability to get access to new technology. The impact of FDI on domestically-owned firms’ technology development is less examined but it is frequently argued that technology externalities or demonstration effects could have a positive impact. Another and so far little examined effect of FDI on technology development in domestically-owned firms is through the impact on competition. We examine the effect of FDI on competition in the Chinese manufacturing sector and the effect of competition on firms’ R&D. Our analysis is conducted on a large dataset including all Chinese large and medium sized firms over the period 1998-2004. Our results show that FDI increases competition but there are no strong indications of competition affecting investments in R&D.

 

Fredrik Sjöholm

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Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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