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Frontiers of Economics in China

Front Econ Chin    2013, Vol. 8 Issue (3) : 430-451     https://doi.org/10.3868/s060-002-013-0021-7
research-article
Does Openness Increase the Efficiency of China’s Manufacturing Firms? Evidence from the World Bank Investment Climate Survey
Wenjun Liu(), Shuliang Zou
College of Economics and Management, University of South China, Hengyang 421001, China
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Abstract

Based on the World Bank Investment Climate Survey, this paper investigates the openness effects on the efficiency of firms in China’s manufacturing industry using a two-step data envelopment analysis (DEA) approach. In the first step, the aggregate efficiency of open firms and non-open firms is compared in each sub-industry using a group-wise heterogeneous bootstrap procedure. The results show, at a 90% confidence level, that open firms are more efficient than non-open firms in four out of five sub-industries. Furthermore, in the second step, we employ the two-stage bootstrap DEA approach to more specifically evaluate the effects of openness on the efficiency of firms. The regression results show that three openness indicators (foreign capital, import and export) have strong positive effects on firms’ efficiency in China’s manufacturing industry. In addition, the results also suggest that a larger state share, larger firm size, and more capital stock are negatively related to the efficiencies of firms, while a firms’ learning and absorptive capacity is positively related to its efficiency.

Keywords openness      efficiency      China      DEA      Investment Climate Survey     
Corresponding Author(s): Wenjun Liu,Email:liuwenjun@usc.edu.cn   
Issue Date: 05 September 2013
 Cite this article:   
Wenjun Liu,Shuliang Zou. Does Openness Increase the Efficiency of China’s Manufacturing Firms? Evidence from the World Bank Investment Climate Survey[J]. Front Econ Chin, 2013, 8(3): 430-451.
 URL:  
http://journal.hep.com.cn/fec/EN/10.3868/s060-002-013-0021-7
http://journal.hep.com.cn/fec/EN/Y2013/V8/I3/430
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