Efficiency Sorting Among Foreign Affiliates: Evidence from China

14 Pages Posted: 13 Mar 2015

See all articles by Yasheng Chen

Yasheng Chen

Xiamen University

Ying Ge

University of International Business and Economics

Huiwen Lai

Hong Kong Polytechnic University

Qing Liu

University of International Business and Economics (UIBE)

Date Written: March 2015

Abstract

This paper uses a large micro‐level data set to investigate the efficiency sorting pattern of foreign affiliates serving different markets. We find systematic differences among the attributes of foreign affiliates serving the local and overseas markets. Affiliates serving only the host country market are the most productive, the most capitalintensive and the most skill‐intensive. Affiliates serving only the international market are the most unskilled and labour‐intensive, the least efficient, pay the lowest wages and invest least in innovation and advertising. Affiliates serving both markets offer high wages and invest most in innovation and advertising. The results also suggest that the most productive affiliates choose to serve the host country market, whereas the least efficient affiliates target the international market.

Suggested Citation

Chen, Yasheng and Ge, Ying and Lai, Huiwen and Liu, Qing, Efficiency Sorting Among Foreign Affiliates: Evidence from China (March 2015). The World Economy, Vol. 38, Issue 3, pp. 568-581, 2015, Available at SSRN: https://ssrn.com/abstract=2577051 or http://dx.doi.org/10.1111/twec.12210

Yasheng Chen (Contact Author)

Xiamen University

Xiamen, Fujian 361005
China

Ying Ge

University of International Business and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

Huiwen Lai

Hong Kong Polytechnic University ( email )

Hung Hom, Kowloon
Hong Kong

Qing Liu

University of International Business and Economics (UIBE)

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

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