Domestic vs foreign superstars: comparative advantage and productivity spillovers

Superstar firms are seen as catalysts of comparative advantage and competition. This paper challenges this perception using Chinese firm-level data from 1998 to 2007, revealing that superstar firm dominance had an average negative impact on industry export competitiveness up to at least 2003. Concentration into foreign-owned superstars, however, had a positive influence on industry exports throughout the period. Heterogeneity according to how an industry was poised for growth further indicates a story of convergence as the Chinese economy developed. Moreover, this paper leverages an industry-specific shock to find unique and positive horizontal spillovers from superstar FDI on the productivity of local firms. These findings offer valuable insights into key aspects of China’s successful industrial policy during the height of its export-led growth. They particularly underscore the significance of firm ownership when applying the literature on superstar firms to emerging economies.