Working Paper: NBER ID: w24455
Authors: Kun Jiang; Wolfgang Keller; Larry D. Qiu; William Ridley
Abstract: We study the economics of international joint ventures using administrative data for China. We first show that foreign investors choose Chinese partners that are relatively large, productive, and more innovative to set up their joint venture. Using a difference-in-differences framework and accounting for these selection effects, we then provide evidence that joint ventures lead to domestic benefits in the form of productivity and technological spillovers to both the Chinese partners in joint ventures as well as other domestic Chinese firms. Exploiting the easing of joint venture requirements as China entered the WTO in the year 2001, we further show that intra-industry spillovers from joint ventures to other domestic firms increased in the wake of China’s WTO accession, consistent with gains from foreign technology rising due to enhanced commitment through the rules-based WTO system. Our results shed new light on the efficacy of FDI performance requirements as well as on claims regarding international technology transfer that underpinned the China-US trade war.
Keywords: international joint ventures; technology transfer; China; WTO accession; foreign direct investment
JEL Codes: F23; O31; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Formation of international JVs (F23) | Increase in total factor productivity (TFP) of domestic partner firms (O49) |
| Formation of international JVs (F23) | Increase in patent applications by domestic firms (O39) |
| International JVs (L24) | Positive intergenerational spillovers to domestic partner firms (J12) |
| JVs with foreign investors (F23) | Largest productivity gains for domestic firms (O49) |
| JVs (L24) | Horizontal spillovers to other domestic Chinese firms (F69) |
| Increased presence of JVs (L24) | Increased productivity in industries (O49) |