Robin Kaiji Gong

Kaiji Gong
Local Technology Spillover of Multinational Firms
2018 Dissertation Fellowship

In this paper, we identify the causal impact of technology spillover from multinational subsidiaries to the local firms in China. Combining firm-level data from both U.S. and China, we manually match U.S. public firms to their Chinese subsidiaries and measure their spillover strength based on the parent firms' patenting activities. To address potential endogeneity problems, we adopt an instrumental variable strategy based on the R&D tax credit policy in the U.S. We find the effect of multinationals' technology shocks to be positive on local Chinese firms' employment and total factor productivity (TFP). The spillover effect is also intra-sectoral and decays with distance. We further illustrate that local firms' productivity gains from technology spillovers are closely related to their own innovation capability using a simple theoretical framework. We then provide a set of empirical evidence consistent with the theoretical predictions.