Foreign direct investment, via 'quid pro quo', facilitated knowledge spillovers and quality upgrades in the Chinese automobile industry
Read "Quid Pro Quo, Knowledge Spillover, and Industrial Quality Upgrades: Evidence from the Chinese Auto Industry" by Jie Bai, Panle Jia Barwick, Shengmao Cao and Shanjun Li here.
In the Chinese automobile industry, in order to be granted market access to China, foreign automakers are required to set up joint ventures with domestic firms. In this VoxDevTalk, Jie Bai joins us to discuss whether this quid pro quo policy, where foreign firms trade their technology for market access, enabled knowledge spillovers and quality upgrades amongst Chinese automobile manufacturers. By using a new dataset with detailed vehicle quality measures, this research project, joint with Panle Jia Barwick, Shengmao Cao and Shanjun Li, demonstrates that domestic automakers do improve quality as a result of this policy.