R&D, Human Capital Investment and Productivity: Firm-Level Evidence from China's Electronics Industry

18 Pages Posted: 15 Sep 2010

See all articles by Chih‐Hai Yang

Chih‐Hai Yang

National Central University - Department of Economics

Chun-Hung A. Lin

affiliation not provided to SSRN

Daw Ma

affiliation not provided to SSRN

Abstract

Using firm-level panel data covering 2005–2007, the present paper examines the effects of R&D and human capital investment on productivity in China's electronics industry. It is found that both R&D and on-the-job training positively contribute to total factor productivity (TFP). Firms' investment in employees' health insurance and pensions, which are components of workers' compensation, generate a productivity-enhancing effect, supporting the efficiency wage hypothesis. The estimated impact of R&D on productivity varies among different forms of ownership, and foreign-owned enterprises experience higher R&D efficiency than state or private enterprises. After controlling for potential endogenous causality between TFP and R&D, the above findings remain unchanged. We also find that on-the-job training can improve the quality of human capital and is helpful in promoting productivity. Therefore, establishing indigenous technological capability through various technological sources is quite important, and the government should devote further effort to investing in human capital.

Suggested Citation

Yang, Chih-Hai and Lin, Chun-Hung A. and Ma, Daw, R&D, Human Capital Investment and Productivity: Firm-Level Evidence from China's Electronics Industry. China & World Economy, Vol. 18, Issue 5, pp. 72-89, September-October 2010, Available at SSRN: https://ssrn.com/abstract=1677110 or http://dx.doi.org/10.1111/j.1749-124X.2010.01213.x

Chih-Hai Yang (Contact Author)

National Central University - Department of Economics ( email )

NO.300 Jung-da Rd.
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Chun-Hung A. Lin

affiliation not provided to SSRN

No Address Available

Daw Ma

affiliation not provided to SSRN

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