Service liberalization and productivity in high-tech firms: Evidence from China

This article studies the relationship between service liberalization and the productivity of high-tech manufacturing. Examining the sudden relaxation of FDI regulation in several service sectors in China, this article finds that service liberalization improves high-tech firms' TFP. The effect is greater in non-SOEs, firms with a higher degree of service dependence, and firms located in regions with better institutional environments. Furthermore, after service liberalization, high-tech firms of all sizes have more outsourcing service expenditures and spend less on intermediate inputs. Only large-sized high-tech firms increase their R&D expenditures to improve production efficiency.