Here - Beedie School of Business - Simon Fraser University

decrease more quickly due to higher opportunity costs associated with technology
dependency. Hence, we reach the following hypothesis.
H2: The inverted U-shape effect of IJV presence on innovative capabilities of indigenous
firms will be more salient in industries with low technology gap than in those with high
technology gap.
Sample and Data
METHODS
To test our hypotheses, we constructed a longitudinal sample of 474 industries in
China during 1998–2002, using China’s Annual Census of Industrial Enterprises (hereafter
referred to as “the Census data”). The Census data, compiled by the National Bureau of
Statistics of China, consist of detailed information about a company’s operational profile,
such as total production output, total output accounted for by new products, number of
employees, type of ownership, accumulated capital investment, etc. Articles that use data
publications by the National Bureau of Statistics of China (such as China Statistical
Yearbook and Industrial Census) have been published in leading academic journals such as
Journal of International Business Studies and China Economic Review (e.g., Buckley et al.,
2002; Li et al., 2001; Lin, 2000). Since our study is based on industry-level information, we
aggregated firm-level data to industry level according to the four-digit industry codes in the
Census data, which are similar to the SIC codes used in the U.S. (Buckley et al., 2002). For
the period 1998–2002, the Census dataset covers 606 industry sectors, some of which have
no foreign-investment presence. Given the purpose of this paper, we excluded all the
sector-year observations in which IJV presence is nil. As a result, our final sample includes
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