Determining Characteristics of Firms in China that Have Access to Foreign Licensed Technology: An Econometric Approach Using Probit

Abstract: This paper explores the effect of firm characteristics in terms of licensing foreign technology for firms located in the eastern region of China. Existing studies apply general licensing theory to what might be a factor of regional and industry specific preferences. This paper deploys several probit models based on data gathered by the World Bank to empirically find evidence to support firm attributes and their effect on foreign licensing. The results present us with insights that seem to support that Joint Ventures are more prone to license foreign technology than wholly owned firms, but only on a general level. When controlling for region and industry, firm size, a dummy variable for being a subsidiary and a fractional variable R&D/sales show positive and significant effects on predicted probability of using a foreign license. Significant effects were also found in certain coastal and hinterland regions, as well as in two industry sectors.