Does Matching with Foreign-Invested Enterprises Improve the Productivity of Chinese Enterprises?. Issue 15 (8th December 2019)

• Record Type: Journal Article
• Authors: Zhang, Yu; Dai, Xiang; Shao, Yuchen
• Is Part Of: Emerging markets finance & trade. Volume 55:Issue 15(2019)
• Page Start: 3404
• Page End: 3416
• Publication Date: 2019-12-08
• Subjects: matching -- peer effect -- productivity -- self-selection; F10 -- F23; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2019.1603541
• Languages: English
• ISSNs: 1540-496X

Abstract

ABSTRACT: Rapid expansion of China's exports and inward foreign direct investment (FDI) are characteristic of China's outward-oriented economy. Based on a unique micro-level survey on the co-development between domestic enterprises and foreign-invested enterprises in Kunshan County of Jiangsu Province, this paper finds that domestic enterprises can improve their productivity by matching (in terms of supply, processing, or original equipment manufacturer [OEM] relationship) with foreign-invested enterprises. A self-selection mechanism of matching is at work for domestic enterprises involved in exports: when foreign-invested enterprises operate in China, domestic enterprises compete to match with them, which eventually helps them improve. Empirical analysis supports the emergence of this mechanism, together with a learning-by-exporting effect and a peer effect. In addition, with respect to the peer effect, the improvement in productivity at domestic enterprises whose main product is intermediate inputs depends more on skilled or high-quality labor, while that of domestic enterprises whose main products are capital and consumable products depend more on management staff.