How does FDI influence industry-level knowledge production efficiency in China?

Based on the knowledge production function (KPF) framework, this article uses industry-level data of Chinese large and medium size manufacturing industries from 2001-2009 to explore the impacts of intra-industry and inter-industry foreign direct investment (FDI) presence on the efficiency of knowledge production (in terms of product-related and patent-related knowledge production). The empirical results reveal that intra-industry FDI presence has a positive effect on knowledge production, especially for product-related knowledge production efficiency. In contrast, inter-industry FDI presence has a negative effect on patent-related knowledge production efficiency, and a positive but insignificant effect on product-related knowledge production efficiency. Our study provides empirical evidence of the potential effect the difference between intra-industry and inter-industry FDI presence has on knowledge production. In addition, this study indicates that the contribution of FDI presence to knowledge production efficiency is more associated with product-related knowledge production than with patent-related knowledge production.