Foreign direct investment and the innovation performance of local enterprises

Abstract

Based on the micro data set of Chinese manufacturing enterprises, this study examines in detail the impact of foreign direct investment on the innovation performance of Chinese local enterprises and its mechanism. Results show that foreign direct investment helps to improve the innovation performance of Chinese local enterprises, and spillover effect and competition effect are important ways for foreign direct investment to affect the innovation performance of local enterprises. In addition, the impact of foreign direct investment on the innovation of local enterprises of different types varies. Foreign direct investment has significantly promoted the innovation of high-productivity, capital-intensive, non-coastal, export, and non-state-owned enterprises. This study enriches the research literature on foreign direct investment and enterprise innovation and provides new micro evidence for understanding the impact of foreign direct investment on the innovation performance of local enterprises.