Product Innovation, Exporting, and Foreign Direct Investment: Theory and Evidence from China
Sun, Sizhong | March 2019
Abstract
This paper explores the inter-connection between domestic firms’ product innovation, exporting, and the presence of foreign direct investment (FDI). We first set up a theoretical model where, in a monopolistically competitive market, heterogeneous firms first make an optimal decision on product innovation and then set prices for their products in both the domestic and foreign markets. Under mild assumptions, the theoretical model generates a set of population moments, which are applied using data on eight three-digit manufacturing industries in China. We find evidence that firms’ product innovation is positively correlated with their export revenue, and the presence of FDI affects firms’ product innovation and export behaviour both directly and indirectly (via its impact on product innovation), albeit not in all industries. The findings have significant implications for policymakers, not only in China but also other developing countries.
Citation
Sun, Sizhong. 2019. Product Innovation, Exporting, and Foreign Direct Investment: Theory and Evidence from China. © Economic Research Institute for ASEAN and East Asia. http://hdl.handle.net/11540/9802.Keywords
Political Leadership
Public Administration
Business Ethics
Electronic Government
Online Government
Assessing Corporate Governance
Corporate Governance Reform
Governance Models
Commerce and Industry
Intra-Industry Trade
Large Scale Industry
Labor
Technical Evaluation
Government
Institutional Framework
Public Administration
Business Ethics
Political Leadership
Institutional Framework
Business Management
Corporate Restructuring
Industrialization
Industrial Economics
Industrial Development
Industrial Policy
Technology assessment
Technological institutes
Employment
Information Media
Mass Media
Export Oriented Industries
Electronics
Computers
Telecommunications Industry
Manufacturing Industries
Microprocessors
Electronic Equipment
Communication Industry
Blockchain Technology
Cyber Security
Civil government
Common good
Federal government
Delivery of government services
Government missions
Personnel management
Corporate reorganizations
Intergovernmental cooperation
Consolidation and merger of corporations
Industrial Mergers
Corporate Mergers and Acquisitions
Mergers
Microelectronics industry
Electronic industries
Digital electronics
Microelectronics
Podcasts
Music videos
Internet videos
Interactive videos
Videos
Video recordings
Capital market
Developing countries
Market share
Labor
Technology transfer
Innovation
Financial Transfer
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