Determinants of the Performance of Foreign Invested Enterprises in China

Abstract

In this paper, we attempt to uncover the key determinants of the performance of foreign invested enterprises (FIEs) in China. The results reveal that cash contributed by foreign parent companies had a significantly positive impact on current profitability, but not on subjective performance. There was some evidence that foreign management improved subjective performance. The duration of operation was a consistently positive factor in the success of the FIEs in both profitability and subjective performance. FIEs that sold more output to the domestic market performed better, and so did FIEs in industries consistent with China's comparative advantages. Unexpectedly, FIEs owned by Hong Kong investors did not perform any better than FIEs owned by other foreign investors and FIEs located in Special Economic Zones (SEZs) performed worse than those located outside of SEZs. J. Comp. Econ., June 2001, 29(1), pp. 347–365. Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: F23.