Rethinking Of Export Spillovers Of FDI Firms

In recent years, with the rise and integration of Heterogeneous Firm Theory, the contents of foreign direct investment (FDI) export spillover effects are becoming more and more abundant and FDI export spillover has been regarded as one of the important influencing factors in firm export decision. Although academics have realized that adjacent exporters could establish an endogenous information network which could reduce the fixed export costs, it is still a mystery that whether China’s foreign investment firms can greatly reduce the sunk costs of adjacent domestic firms through the ways such as demonstration, competition and information externality. Based on this, this paper intends to focus on another spillover effect from foreign investment firms--export spillover effect based on market entry.First of all, on the basis of literature review, this paper decomposed China’s domestic and foreign firms’export growth from 2000 to 2012 use China customs HS-4 product data and found that the intensive margin still dominated Chinese firms’ export growth, but the extensive margin had an obvious rising trend than that in the past. Domestic firms’ extensive margin contribution rate was 31.54%, even was higher than 27.59% of the foreign investment firms. At the same time, we also found that the growth rate of domestic firms’ creation of new export linkages was as high as 218.52%, but was a little bit slower than that of foreign investment firms’ 222.78%. This suggested that domestic firms were behind foreign investment firms in terms of developing new market and foreign investment firms maybe played the role of export pioneers.Secondly, through a firm level production decision model, this paper described the mechanism of foreign export spillover. The channel was that foreign export behaviors could affect domestic firms’ export decision-making by cutting the entry costs of domestic firms. Then, in combination with the industry level production decision model we extended the firm level model to province-product level and found that the export activities of foreign investment firms could improve same province’s domestic firms’ export tendency to export the same product by cutting the costs of foreign sales costs. This is also the theory basis of the empirical part.To explore the role of foreign export spillover in domestic firms’export decision, this paper constructed about 9.66 million "province-product-destination-year" four-dimensional dataset using China customs HS-4 product data for 2000-2012. We tested the panel data by a binary Logit model with various robustness tests and found that foreign-invested firms had become the main source of China’s export growth, while its export activities also had a positive impact on domestic firms’entry to export markets:foreign investment firms’ export would increase the probability of domestic firms in the same province and neighboring province to export the same product to the same country, and the spillover effects was product-destination specific; Foreign firms’presence would also significantly increase the probability of domestic firms to export the same product to the same country; Classification test for ordinary trade and processing trade further found that the spillover effects of foreign investment firms occurred mainly in ordinary trade activities.Finally, the paper revealed the basic conclusions and put forward some feasible policy suggestions from the perspectives of government and firms themselves to make full use of foreign export spillover and promote the sustainable development of China’s export.