International joint ventures and technology diffusion: Evidence from China

Abstract This paper investigates international technology diffusion through FDI by explicitly considering the ownership structure of FDI projects with detailed Chinese data. We find that international joint ventures ( JV s) generate significantly positive technology diffusion effects, while wholly foreign‐owned firms ( WFO s) generate significantly negative competition effects. The differentiated impacts of JV s and WFO s are robust, heterogeneous and causal as shown by our instrumental variable estimation. As for the mechanisms, evidence suggests that JV s bring better technology to the host country, invest more in R&D and employee training, and also provide easier technology access to local firms than WFO s.