Do Multinationals' R&D Activities Stimulate Indigenous Entrepreneurship?: Evidence from China's "Silicon Valley"
National Bureau of Economic Research, 2007 - Entrepreneurship - 38 pages
Using a unique firm-level dataset from China's "Silicon Valley, " we investigate how multinational enterprises (MNEs) affect local entrepreneurship and R&D activities upon entry. We find that R&D activities of MNEs in an industry stimulate entry of domestic firms into the same industry and enhance R&D activities of newly entering domestic firms. By contrast, MNEs' production activities or domestic firms' R&D activities do not have such effect. Since MNEs are technologically more advanced than domestic firms, our findings suggest that diffusion of MNEs' advanced knowledge to potential indigenous entrepreneurs through MNEs' R&D stimulates entry of domestic firms.
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activities of incumbent Arellano-Bond statistics Beijing Blundell and Bond China columns crowding-out effect dataset demand-creation effect dependent variable developed by Blundell domestic entrants domestic entrepreneurship effect of MNEs effect on entry employment Domestic firms employment of MNEs endogeneity entries of MNEs entry and R&D entry of domestic existing domestic firms firm-level sales firms newly entering GMM GMM GMM gross entries Hansen high-tech firms Impact of MNEs impact on entry incumbent domestic firms incumbent firms incumbent MNEs industry knowledge diffusion knowledge-diffusion effect knowledge-diffusion hypothesis Log of R&D Mean of firm-level MNEs and domestic MNEs on entry Motorola non-R&D employment number of firms number of gross outsourcing from MNEs Peking University percent positive and significant potential indigenous entrepreneurs presence of MNEs production activities R&D activities R&D centers R&D cooperation R&D employment Domestic rate of total Standard errors stimulate entry system GMM estimation TechFaith Tsinghua University Ultrapower Z-Park Zhongguancun Science Park