Does Agglomeration Promote the Internationalization of Chinese Firms?

Author Name ITO Banri  (Fellow, RIETI) /XU Zhaoyuan  (ERI-DRC, State Council of China) /YASHIRO Naomitsu  (Consulting Fellow, RIETI)
Creation Date/NO. September 2013 13-E-081
Research Project Study of the Creation of the Japanese Economy and Trade and Direct Investment
Download / Links


This study empirically examines the role of agglomeration in enabling firms to begin exporting, using a large dataset of Chinese firms. Knowledge spillover caused by the agglomeration of exporters can reduce the initial cost of export, thereby lowering the "productivity cut-off" required to export. A parametric estimation of an export entry model indicates that the agglomeration of incumbent exporters contributes significantly to export participation, although its magnitude is limited. These spillover effects are generated not only by the agglomeration of exporting foreign invested firms (FIFs), but also, more importantly, by that of indigenous Chinese exporters. In fact, the agglomeration of exporting FIFs only contributes to the export entry of FIFs, yet has a negative impact on indigenous Chinese firms' export participation.