Foreign Competition, Industrial Linkage and Domestic Firms’ Survival in China
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| Title | Foreign Competition, Industrial Linkage and Domestic Firms’ Survival in China
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| Author | Bao Qun, Ye Ninghua and Yanling Wang |
| Organization | Nankai University；Carleton University |
| Email | baoqun@yeah.net；yeninghua1118@163.com |
| Key Words | Foreign Investment; Duration; Industrial Linkage; Survival Analysis |
| Abstract | the influx of foreign investment inevitably forces China’s domestic firms to exit, and hence decreases the survival probability of the latter. Using Chinese manufacturing firms’ data during 2000-2007, we adopt the survival analysis to examine the effect of foreign entry on survival and death of Chinese domestic firms. We find that although foreign firms do propel more domestic firms to exit among the same industry through the competition effect, they also create new market chances for the latter through backward and forward industrial linkages. As we estimate a significantly positive combined effect, it indicates the external shock due to foreign entry is not as big as we usually expect. Compared with SOEs, it is easier for Chinese private firms to establish vertical industrial linkages with foreign-invested firms. Generally our findings provide evidence and policy suggestions on how local firms in developing economies adapt themselves to foreign competition. |
| Serial Number | WP408 |
| Time | 2013-08-01 |
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