Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 708: FDI, Market Structure and R&D Investments in China

Nannan Lundin (), Fredrik Sjöholm (), Ping He and Jinchang Qian
Additional contact information
Nannan Lundin: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden, and Örebro University
Fredrik Sjöholm: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden, and Örebro University
Ping He: National Bureau of Statistics of China
Jinchang Qian: National Bureau of Statistics of China

Abstract: FDI can be an important channel for developing countries’ ability to get access to new technology. The impact of FDI on domestically-owned firms’ technology development is less examined but it is frequently argued that technology externalities or demonstration effects could have a positive impact. Another and so far little examined effect of FDI on technology development in domestically-owned firms is through the impact on competition. We examine the effect of FDI on competition in the Chinese manufacturing sector and the effect of competition on firms’ R&D. Our analysis is conducted on a large dataset including all Chinese large and medium sized firms over the period 1998-2004. Our results show that FDI increases competition but there are no strong indications of competition affecting investments in R&D.

Keywords: China; FDI; Competition; R&D

JEL-codes: F23; L11; O31

30 pages, June 21, 2007

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