Ownership biases and FDI in China: two provinces
Name
4537-04.pdf
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498.52 KB
Format
Adobe PDF
Checksum (MD5)
b656f01b5c515aa7ef7615701e3b5818
Author(s)
Huang, Yasheng
Date Issued
June 3, 2005
Series/Report no.
MIT Sloan School of Management Working Paper;4537-04
Abstract
Jiangsu and Zhejiang are of two of China most prosperous and dynamic provinces. This paper first presents a factual account of two empirical phenomena: 1) FDI has played a more substantial role in the economic development of Jiangsu than in Zhejiang, and 2) ownership biases against domestic private firms in Jiangsu were more substantial than in Zhejiang. The paper hypothesizes that there is a connection between these two empirical phenomena. Specifically, ownership biases against domestic private firms increase preferences for FDI because FDI provides a measure of relative property rights security. Thus a biased domestic private firm has an incentive to move its assets and/or future growth opportunities to the foreign sector. The paper uses two private-sector surveys - one conducted in 1993 and the other in 2002 - to provide an empirical test of this hypothesis. Our analysis shows, controlling for a variety of firm-level attributes and industry and regional characteristics, those private firms which perceive ownership biases to be more severe are more likely to form joint ventures with foreign firms.
Subjects
Ownership Biases
FDI
China
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