How do Multinational Firms Impact China’s Technology? The Role of Quid Pro Quo Policy and Technology Spillovers

Ma, Xiao and Zhang, Yiran (2023): How do Multinational Firms Impact China’s Technology? The Role of Quid Pro Quo Policy and Technology Spillovers.

Abstract

Multinationals play a crucial role in international knowledge diffusion. Given the recent concern that multinationals are departing China, understanding the importance of multinationals for China's technology is also particularly policy-relevant. Using comprehensive patent data from China, we document: (1) multinational affiliates and their foreign parent firms comprise a significant portion of patents filed with China’s patent office; and (2) there are subsequent transfers and spillovers of these technologies to domestic firms. Guided by the empirical findings, we develop a quantitative framework of multinational activities featuring cross-country technology flows, transfers, and spillovers. Quantitatively, we find that without multinational production and knowledge spillovers, China's total technology capital would drop by 36%. Furthermore, due to the externalities of multinationals’ technology investments, subsidizing multinationals in China will be socially beneficial, and reduced knowledge transfers/spillovers largely amplify the negative effects of multinationals' departing China on both China's GDP and technology.

• Item Type: MPRA Paper
• Language: English
• Keywords: multinational activities; technology transfers; knowledge spillovers
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes

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