Can You Teach Old Dragons New Tricks? FDI and Innovation Activity in Chinese State-Owned Enterprises

31 Pages Posted: 14 Nov 2006

See all articles by Sourafel Girma

Sourafel Girma

Nottingham University Business School

Yundan Gong

Nottingham University Business School

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Multiple version iconThere are 2 versions of this paper

Date Written: September 2006

Abstract

We investigate whether inward FDI, either at the firm or industry level, has any impact on product innovation by Chinese State-owned enterprises (SOEs). We use a comprehensive firm level panel data set of Chinese SOEs covering the period 1999 to 2003. Our results show that foreign capital participation is associated with higher innovative activity. Inward FDI in the sector has a negative effect on innovative activity in SOEs. However, there is a positive effect of FDI on SOEs that export, invest in human capital or R&D, or have prior innovation experience. We also find that SOEs with internal R&D activity and human capital development are successful innovators. Hence, our results suggest that rather than relying on sector level inward FDI to improve domestic innovative activity, it is important to get the firm-level fundamentals right.

Keywords: Innovation, FDI, state-owned enterprises, spillovers, competition, China

JEL Classification: F23, O31

Suggested Citation

Girma, Sourafel and Gong, Yundan and Gorg, Holger, Can You Teach Old Dragons New Tricks? FDI and Innovation Activity in Chinese State-Owned Enterprises (September 2006). CEPR Discussion Paper No. 5838. Available at SSRN: https://ssrn.com/abstract=944908

Sourafel Girma (Contact Author)

Nottingham University Business School ( email )

Jubilee Campus
Nottingham, NG8 1BB
United Kingdom
+44 0 115 8466656 (Phone)

HOME PAGE: http://www.nottingham.ac.uk/~lizsmg/

Yundan Gong

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham NG8 1BB
United Kingdom

Holger Gorg

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

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