Abstract
In this study, we examine the productivity spillovers of foreign direct investment (FDI) to domestic firms sourced from foreign firms’ local innovation. Based upon a panel dataset on manufacturing firms in China over the period from 1998 to 2007, we find that local innovation undertaken by foreign firms in an industry can spill over to and benefit domestic firms in the same industry. Further, we find that this positive productivity spillover is significantly stronger when foreign firms have higher intangible asset intensity, share longer overlapping years and densely co-located with domestic firms.
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