FDI,Indirect Horizontal Spillover And Firm Productivity In China's Manufacturing Industry

Foreign direct investment(FDI)usually include rich capital,advanced technology and efficient management experience.Through the flow of capital in worldwide,the productivity of local enterprises in the host country have been improved by FDI,which is also the theoretical basis for the preferential policies to attract more FDI.Therefore,since the 1990 s,the spillover effect of FDI has become one of the hot academic topics.According to the channel of spillover effect,previous studies divide the traditional spillover effect of FDI into horizontal spillover effect existing in intra-industry and vertical spillover effect existing in inter-industry.However,indirect horizontal spillover of FDI has been neglected by most of studies to local enterprises in the same industry through upstream suppliers,which is an important supplement to traditional spillover effect of FDI.In theory,this thesis explains two ways of indirect horizontal spillovers by foreignfunded enterprises,which are increasing the types of intermediate inputs and improving the quality of intermediate inputs.In practice,based on the data of almost 900,000 manufacturing enterprises in 15 industries in China from 2000 to 2005,this thesis explores the indirect horizontal spillover effect of FDI on Chinese manufacturing enterprises.And then the different effect of corporate heterogeneities on indirect horizontal spillover effect and the influence of indirect horizontal spillover on export product quality are studied.The findings are as followed.Firstly,FDI produce significant positive indirect horizontal spillovers to local enterprises through upstream suppliers,which plays an important role between domestic and foreign enterprises in China's manufacturing industry.When considering indirect horizontal spillover effect,foreign-funded enterprises have a stronger inhibition on the productivity of local enterprises through direct horizontal spillover.Secondly,the vertical spillover effect of FDI in China's manufacturing industry is asymmetric.The foreign enterprises have negative effect on the enterprises located downstream,and at the same time,they have positive spillover on the enterprises located upstream.Thirdly,the natures of enterprises,whether trade or not and their size will have impacts on technology spillover of foreign-funded enterprises.Lastly,indirect horizontal spillover of FDI significantly promote the export quality of local enterprises in the same industry.And FDI improves the product quality of upstream suppliers through backward spillover,which also proves that one way of indirect level spillover is that foreign investment promotes intermediate quality.These findings bring us three enlightenments.Firstly,focus on improving localization level of foreign-funded enterprises.Indirect horizontal spillover effect is premised on the localization of foreign-funded enterprises.Therefore,when government adopts more preferential policies to attract foreign investment,more attention should be paid to the improvement of the localization level of FDI and maximize the possibility of indirect horizontal spillover.Secondly,we should pay attention to whether the foreign-funded enterprises have more corporate supply relationship with local enterprises in the upstream industry.Because there is no competitiveness between them,the foreign-funded enterprises are more likely to transfer capital and technology to the upstream enterprises.Therefore,the local enterprises in the upstream industry are easy to obtain technology spillovers from downstream FDI to achieve technological progress and quality improvement.Thirdly,Chinese enterprises should strengthen international cooperation and actively join the international market.To better absorb advanced management experience and technology,and better cultivate the ability of resource allocation and production,Chinese enterprises should further strengthen opening-up and cooperation with international capital.