Three essays on firm productivity, technology spillovers, and foreign direct investment

The essays in this dissertation examine the relationships between firm productivity, managerial characteristics, technology opportunities, and how foreign investment moderates the relationships. The first essay examines the performance consequences of managerial turnover in China's firms. I hypothesize that a new manager promoted from outside of the firm is superior to an insider successor in improving productivity in large firms with more labor redundancy, and in utilizing ties with the government agencies and other stakeholders. I use propensity score matching based on pre-turnover firm characteristics to control for the selection effects of CEO successors, and use investment and intermediate inputs to control for unobserved productivity shocks. The results are large employment and more likely to rely on government financial support. The second essay investigates the relationship between foreign investment and local air pollution in China. I hypothesize that foreign direct investment could have beneficial effects on a developing country's environment when the multinationals crowd out inefficient local firms, change industrial composition, and bring better technology and improve productivity and energy efficiency. Using city level data on air pollution, industry composition, foreign direct investment, and other social economic factors, the study finds no systematic correlation between foreign direct investment and air pollution, after controlling for the location selection of foreign investment with geography and trade policy. The results suggest that the overall effect of foreign direct investment on the environment may be ambiguous. The third essay examines how industrial linkage and geographic location of domestic firms affect the diffusion of technology brought by foreign direct investment. I hypothesize that foreign invested firms have incentives to transfer technology to local suppliers, and such transfer is more effective to improve productivity when the recipient is close to the source of knowledge. Using industrial sector data at city-level and province-level from China, the analysis shows that positive productivity spillovers take place between foreign affiliates and their domestic suppliers located within the same city and in current period, but not at province-level or related to previous foreign presence. The spillovers are associated with joint ventures, but not with wholly-owned foreign subsidiaries.