Foreign direct investment and the performance of indigenous firms in China’s textile industry (original) (raw)
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Incorporating the global production network approach and competitor analysis, this paper establishes an analytical framework with two hypotheses for the role of foreign multinational enterprises (FMNEs) in indigenous firms' exports and domestic sales. First, the presence of FMNEs as a whole is likely to have a negative impact on indigenous firms' domestic sales but a simultaneous positive impact on their exports in an emerging economy like China. Second, the presence of MNEs from Hong Kong, Macau and Taiwan (HMT MNEs) is more likely to generate this pattern of impact than MNEs from other countries (Other FMNEs). The FDI-led export strategy contributed to the dominance of the scenario described by the first hypothesis in China, while a higher degree of market commonality and resource similarity of HMT MNEs with that of indigenous Chinese firms than Other FMNEs leads to the second hypothesis. These novel hypotheses are tested and supported by a very large and recent firm-level panel dataset from Chinese manufacturing.
Journal of Asia Business Studies, 2007
Multinational enterprises (MNEs) play a dominant role in the international business (IB) literature. Traditionally, by far the majority of IB studies deal with issues at the micro level of the individual MNE, or at the meso level of a sample of individual MNEs. This paper focuses on a macro-level issue: the impact of MNE behavior through foreign direct investment (FDI) on international trade, and vice versa. In so doing, this study responds to a recent plea for more macro-level studies in IB into the effect of MNE behavior on the macroeconomic performance of countries as a whole, particularly developing and emerging economies. In this way, IB research would inform the heated debate about the pros and cons of globalization, where antiglobalization rhetoric emphasizes the negative consequences of the increased dominance of MNEs for the world at large and the Third World in particular. In the current study, we focus on the largest developing or emerging economy of all: China. Applying sophisticated econometric techniques, we unravel the causality and direction of FDI -trade linkages for the Chinese economy in the 1980 -2003 period. Recently, Meyer (2004) and Ramamurti (2004) convincingly argued that IB research should partially be redirected to macro-level issues so as to inform opinion and policy-makers about the role of multinational enterprises (MNEs) in the world economy, particularly by linking rich and poor economies. After all, as Meyer (2004: 259) rightly points out, IB studies can help to deepen "our understanding in how foreign direct investment (FDI) influences economic development and national welfare." In the policy domain, this is a controversial issue indeed. On the one hand, traditional economic theory, as advocated by the IMF, would suggest that the role of MNEs and FDI is, by and large, positive. On the other hand, popular antiglobalization rhetoric claims that the modern MNE threatens the world, as is so thought-provokingly argued by such figureheads like Noreeta Hertz (2001) and Naomi Klein (2001). Academically, to date this debate has been dominated by non-IB scholars, particularly economists (Buckley and Casson, 2003). The present paper is an attempt to offer an IB-inspired contribution. Following Meyer's (2004) and Ramamurti's (2004) lead, we deal with the societal effect of FDI in a developing and emerging economy. In effect, we focus on the largest developing or emerging economy of all: China. Applying sophisticated econometric techniques, we unravel the causality and direction of FDI -trade linkages for the Chinese economy in the 1980 -2003 period.
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2004
The purpose of this study is to assess the impact of foreign direct investment (FDI) on the labor productivity and technical efficiency for a cross-provincial sample of Chinese industrial sectors, with a special focus on different FDI sources. After considering some econometric issues, such as heteroscedasticity, simultaneity, collinearity, model misspecification, and normality, through some related hypotheses testing this study concludes that different sources of FDI might lead to contrasting effects on local firms in Chinese industries. Investments from Taiwan, Hong Kong, and Macao (THM) seem to improve their technical efficiency in production, whereas investments from other foreign countries (OFC) primarily affect industrial production of China’s regions in terms of enhancing labor productivity.
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