Credit constraints and spillovers from foreign firms in China

Agarwal, Natasha; Milner, Chris; Riaño, Alejandro

Abstract

This paper examines whether credit constraints affect Chinese firms’ absorption of productivity spillovers originating from the activity of foreign-owned firms. Using firm-level data for 2001–2005, we find evidence of positive spillovers originating from foreign-owned firms from countries other than Hong Kong, Macau and Taiwan for non-state owned Chinese firms operating in the same industry and province. Using an index of external finance dependence to measure credit constraints, we find that only non-state-owned firms operating in industries with external finance dependence below the index median exhibit significantly positive spillovers from the activity of foreign firms.

• Journal Article Type: Article
• Publication Date: Feb 12, 2014
• Journal: Journal of Banking & Finance
• Print ISSN: 1034-3040
• Electronic ISSN: 0378-4266
• Publisher: Thomson Reuters
• Peer Reviewed: Peer Reviewed
• Volume: 48
• APA6 Citation: Agarwal, N., Milner, C., & Riaño, A. (2014). Credit constraints and spillovers from foreign firms in China. Journal of Banking & Finance Law and Practice, 48, doi:10.1016/j.jbankfin.2014.01.036
• DOI: https://doi.org/10.1016/j.jbankfin.2014.01.036
• Keywords: Foreign direct investment; Knowledge spillovers; Credit constraints; China
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S0378426614000508
• Copyright Statement: Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0