Export performance of Chinese domestic firms: the role of foreign export spillovers

Abstract

We investigate how the proximity to multinational exporters influences the creation of new export linkages (extensive margin of trade) by domestic firms in China. Using panel data from Chinese customs for 1997-2007, we show that domestic firms’ capacity to start exporting new varieties to new markets positively responds to the export activity of neighboring foreign firms for that same product-country pair. We find that foreign export spillovers are limited to ordinary trade activities. No foreign export spillovers are found for processing trade. More, export spillovers are stronger for sophisticated products indicating that proximity to foreign exporters may help domestic exporters to upgrade their exports. However we observe that foreign export spillovers are weaker when the technology gap between foreign and domestic firms is large, suggesting that upgrading may not occur when foreign firms have already a strong edge.Export performance; spillovers; FDI; Sophistication