Foreign direct investment and the performance of indigenous firms in China’s textile industry

Sizhong Sun; Sajid Anwar

doi:10.1016/j.qref.2017.03.005

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Foreign direct investment and the performance of indigenous firms in China’s textile industry

Journal article

Open access

Peer reviewed

Foreign direct investment and the performance of indigenous firms in China’s textile industry

Sizhong Sun and Sajid Anwar

Quarterly Review of Economics and Finance, Vol.65, pp.107-113

2017

DOI: https://doi.org/10.1016/j.qref.2017.03.005

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Abstract

FDI

domestic market

export market

China

textile industry

This paper contributes to the debate on the effect of foreign direct investment (FDI) on indigenous firms in host economies. Using a Melitz-type theoretical model involving firm heterogeneity, we first show that FDI affects the revenue of indigenous firms, in both domestic and export markets, through a direct as well as indirect channel. In the presence of positive FDI-related productivity spillovers, the direct effect is positive but the indirect effect is negative. As the overall effect cannot be unambiguously determined, in stage two, we further investigate this issue by using firm level data from China's textile industry over the period 2005-07. We find that FDI in China's textile industry decreases (increases) the revenue of indigenous firms in the domestic (export) market. The empirical results are also robust across (i) alternative measures and (ii) sources of FDI.

Details

Title: Foreign direct investment and the performance of indigenous firms in China’s textile industry
Authors: Sizhong Sun (Author) - James Cook University
Sajid Anwar (Author) - University of the Sunshine Coast - Faculty of Arts, Business and Law
Publication details: Quarterly Review of Economics and Finance, Vol.65, pp.107-113
Publisher: Elsevier BV
Date published: 2017
DOI: 10.1016/j.qref.2017.03.005
ISSN: 1062-9769; 1878-4259
Organisation Unit: School of Business and Creative Industries; Indigenous and Transcultural Research Centre; University of the Sunshine Coast, Queensland; USC Business School - Legacy
Language: English
Record Identifier: 99450329302621
Output Type: Journal article

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