Technology transfer has long been viewed as an important mechanism through which developing economies acquire knowledge and enhance technological capabilities. However, relatively little is known about how market-access policies associated with involuntary technology transfer (ITT) evolve over time and how their liberalisation affects firm behaviour and performance.
This thesis examines the evolution and consequences of China’s ITT-related market-access reforms between 2002 and 2015. Rather than directly observing technology transfer itself, the analysis focuses on observable market-access arrangements, including foreign ownership restrictions, joint-venture requirements, and investment approval conditions. The thesis combines information from China’s foreign-investment policy documents, the China Industrial Enterprise Database (CIED), the PATSTAT global patent database, and firm-level ownership records to investigate how ITT-related market-access policies evolved, how policy liberalisation affected innovation, and how it influenced productivity. A longitudinal industry-level database is constructed from successive revisions of China’s foreign-investment regime, while innovation and productivity effects are examined using propensity-score matching and staggered difference-in-differences approaches.
The results reveal a pronounced asymmetry in policy evolution, with liberalisation substantially outnumbering policy tightening. Policy transitions were systematically associated with industry characteristics, particularly foreign participation. The findings show that ITT policy liberalisation significantly improved firm innovation performance. Firms in liberalised industries increased patenting activity, generated higher-quality innovations, and expanded collaborative innovation networks, although impacts on international innovation activities remained limited.
In contrast, the productivity consequences of liberalisation were less favourable. Firms
Operating in liberalised industries experienced significant declines in total factor productivity on average. These negative effects were concentrated among firms with weaker initial capabilities, including smaller firms, private enterprises, and firms with lower levels of intangible assets. Overall, the thesis demonstrates that market-access liberalisation can simultaneously stimulate innovation and impose adjustment costs, highlighting the importance of firms’ absorptive capacity in shaping the outcomes of institutional reform.
