Entrepreneurship and spillovers from multinationals: Evidence from Chinese private firms

- We use nationwide survey data of Chinese private firms to investigate the spillover effect of multinational enterprises through the specific channel of labor mobility.
- We control for a series of characteristics of the entrepreneurs and the private firms.
- We employ propensity score matching to deal with the potential sample selection bias and calculate the spillover effect non-parametrically.
- We find significant positive spillover effect of multinational enterprises in China through labor mobility.

Using nationwide survey data in China, we find evidence of positive FDI spillover effects via entrepreneurship. After controlling for a series of entrepreneur and firm attributes, our OLS estimates suggest that private firms run by entrepreneurs with MNE work experience outperform their counterparts run by entrepreneurs without MNE work experience. To deal with the potential endogeneity in the sense that inherently more capable entrepreneurs may self-select into MNEs before launching their own businesses, we use a nonparametric way, i.e., the propensity score matching (PSM) method, to identify the MNE “treatment” effect. The PSM estimates remain consistent with the OLS evidence, and the estimates are robust to different sensitivity analyses. We further find that private firms run by MNE-trained entrepreneurs do operate differently from their counterparts in both their global involvement and internal management, which are the underlying channels of the spillovers.