Spillovers and competition among foreign and local firms in China

Abstract

Combining the FDI spillover literature with a competitor analysis framework, we examine the relative size of spillover and competition effects in China between foreign entrants and local firms, among foreign entrants, and among local firms. Our results show that the increased presence of foreign entrants has generally benefited local firms nationally, but has negatively affected the survival rates of local firms in regional markets. Surprisingly, foreign entrants are crowded out not only by their peers, but also by reformed local firms at both the national and regional levels. Copyright (C) 2008 John Wiley & Sons, Ltd.