Technological Relatedness and Asymmetrical Firm Productivity Gains Under Market Reforms in China

This paper employs fixed effect quantile regression techniques to study the effects of technological relatedness on firm productivity and to investigate whether the size of those effects varies for low and high performing firms. Next, we consider how changes in the local industrial mix brought about by China's market reforms influence the ability of different types of firms to benefit from technological related spillovers. The findings highlight the important role that technological relatedness has on increasing firm productivity, providing some support that regions should pursue a strategy of 'regional branching' to evolve the local industrial mix into related economic activities. The findings also reveal, however, that increasing technological relatedness may asymmetrically harm under performing firms and widen disparities in productivity between local firms