Monday, 9 June 2008

Greenfield FDI and innovation

Apologies for the lack of posts recently, exam marking time in academia.

Here is a paper that I need to read. The impact of foreign firms in China is complex. The pursuit of profit has lead many MNEs into China but at what cost? What is the impact on UK/US jobs? On wages in both the west and China, on the growth and innovation in both countries?

Whilst I would have had some concerns if I had refereed this paper and it is more "business school" than "economics" it is a good starting point.

The impact of greenfield FDI and mergers and acquisitions on innovation in Chinese high-tech industries [Journal of World Business]

Xiaohui Liu
Huan Zou1,

Business School, Loughborough University, Leicestershire LE11 3TU, UK

Available online 20 December 2007.


Using panel data analysis, this paper investigates the impact of international technology spillovers on innovation in Chinese high-tech industries through greenfield foreign direct investment, cross-border mergers and acquisitions and trade. We report that foreign greenfield R&D activities by multinational corporations in a host country significantly affect the innovation performance of domestic firms and there exist both intra-industry and inter-industry spillovers from foreign greenfield R&D. There are only inter-industry M&A spillovers. We find that importing foreign technology and investing in domestic R&D have positive impacts on domestic innovation. The findings have important implications for theory, practitioners and policy-makers.

Keywords: Innovation performance; Foreign R&D activities; Cross-border M&As; Chinese high-tech industries

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