International Joint Ventures and Internal Versus External Technology Transfer: Evidence from China

42 Pages Posted: 26 Mar 2018

See all articles by Kun Jiang

Kun Jiang

The University of Hong Kong

Wolfgang Keller

University of Colorado; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Larry D. Qiu

The University of Hong Kong - Faculty of Business and Economics; Hong Kong University of Science & Technology (HKUST) - Department of Economics

William Ridley

University of Colorado at Boulder - Department of Economics

Date Written: March 2018

Abstract

This paper studies international joint ventures, where foreign direct investment is performed by a foreign and a domestic firm that together set up a new firm, the joint venture. Employing administrative data on all international joint ventures in China from 1998 to 2007-roughly a quarter of all international joint ventures in the world-we find, first, that Chinese firms chosen to be partners of foreign investors tend to be larger, more productive, and more likely subsidized than other Chinese firms. Second, there is substantial technology transfer both to the joint venture and to the Chinese joint venture partner, an external, intergenerational technology transfer effect that this paper introduces. Third, with technology spillovers typically outweighing negative competition effects, joint ventures generate on net positive externalities to other Chinese firms in the same industry. Joint venture externalities are large, perhaps twice the size of wholly-owned FDI spillovers, and it is R&D-intensive firms, including the joint ventures themselves, that benefit most from these externalities. Furthermore, the positive external joint venture effect is larger if the foreign firm is from the U.S. rather than from Japan or Hong Kong, Macau, and Taiwan, while this effect is virtually absent in broad sectors that include economic activities for which China's FDI policy has prohibited joint ventures.

Keywords: competition effects, Foreign direct investment, international joint ventures, partner selection, technology spillovers

JEL Classification: F14, F23, O34

Suggested Citation

Jiang, Kun and Keller, Wolfgang and Qiu, Larry Dongxiao and Ridley, William, International Joint Ventures and Internal Versus External Technology Transfer: Evidence from China (March 2018). CEPR Discussion Paper No. DP12809. Available at SSRN: https://ssrn.com/abstract=3149481

Kun Jiang (Contact Author)

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Wolfgang Keller

University of Colorado ( email )

Department of Economics
PO Box 256
Boulder, CO 80309
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Larry Dongxiao Qiu

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

School of Economics and Finance
University of Hong Kong
Pokfulam
Hong Kong

HOME PAGE: http://www.bm.ust.hk/~larryqiu/

William Ridley

University of Colorado at Boulder - Department of Economics

Campus Box 256
Boulder, CO 80309
United States

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