Heterogeneity of FDI export spillovers and its policy implications: the experience of China

Abstract

This paper explores the magnitude and heterogeneity of foreign direct investment (FDI) export spillovers in China. Using a Heckman sample selection model estimated over a rich firm-level dataset in China’s manufacturing sector from 2000 to 2003, we find that FDI exerts significant impacts on the exporting behavior of domestic firms, and such impacts are heterogeneous in that some firms receive positive impacts while others receive negative impacts. The heterogeneity of FDI spillovers has significant policy implications as it indicates that government policies need to be more specific and targeted in order for the benefits of FDI to be reaped.