Working Paper: NBER ID: w13618
Authors: Hongbin Cai; Yasuyuki Todo; Lian Zhou
Abstract: Using a unique firm-level dataset from China's "Silicon Valley," we investigate how multinational enterprises (MNEs) affect local entrepreneurship and R&D activities upon entry. We find that R&D activities of MNEs in an industry stimulate entry of domestic firms into the same industry and enhance R&D activities of newly entering domestic firms. By contrast, MNEs' production activities or domestic firms' R&D activities do not have such effect. Since MNEs are technologically more advanced than domestic firms, our findings suggest that diffusion of MNEs' advanced knowledge to potential indigenous entrepreneurs through MNEs' R&D stimulates entry of domestic firms.
Keywords: multinational enterprises; R&D activities; indigenous entrepreneurship; knowledge diffusion; China's Silicon Valley
JEL Codes: F23; L26; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| MNEs' R&D activities (O32) | domestic firm entry (F23) |
| MNEs' R&D activities (O32) | R&D activities of newly entering domestic firms (O31) |
| MNEs' production activities (F23) | domestic firm entry (F23) |
| MNEs' R&D activities (O32) | relocation of existing domestic firms to the Z-Park (R30) |
| MNEs' R&D employment (O32) | R&D employment of domestic firms upon entry (F23) |