Vertical Spillover Effects of Multinationals on Chinese Domestic Firms via Supplier-Customer Relationships

Foreign direct investment （FDI） can benefit domestic firms in the host country. Using firm- level data for China, we find statistically positive vertical spillover effects of multinational enterprises on the performance of domestic firms through backward and forward supplier- customer relationships....

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Bibliographic Details
Published in:China & world economy 2013-11, Vol.21 (6), p.37-57
Main Authors: Lin, Faqin, Zhang, Chao, Wang, Lin
Format: Article
Language:English
Subjects:
China
Domestic market
Domestic markets
F21
Foreign direct investment
Foreign investment
Host country
Investments abroad
L14
Multinational corporations
Multinational enterprises
O53
Regression analysis
Spillovers
Studies
supplier-customer relationships
Vendor supplier relations
vertical spillover effects
World economy
中国企业
供应商
国内企业
垂直
外国直接投资
客户关系
溢出效应
跨国公司
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Summary:Foreign direct investment （FDI） can benefit domestic firms in the host country. Using firm- level data for China, we find statistically positive vertical spillover effects of multinational enterprises on the performance of domestic firms through backward and forward supplier- customer relationships. The spillover effects are mainly from large multinational enterprises and are greater for state-owned firms and in poor regions. Our results are robust for both parametric regression and nonparametric matching techniques. Our findings have strong policy implications： while regulations relating to building business relationships with domestic firms when seeking foreign direct investment should be established, such policies should be aimed at private firms, big multinationals and less developed regions.
ISSN:1671-2234
1749-124X
DOI:10.1111/j.1749-124X.2013.12045.x