The Spillover Effect Of Star Firms

Attracting investment and star firms to settle is the secret of success of many developed areas and also the surefire route of those developing areas to seizing opportunity and accelerating the economic development. The reason why government is keen to attracting investment and star firms is not only directly enlarging the local GDP, but also using the spillover effect to improving the economic situation, technology and labor quality.In this paper we inspect whether the spillover effect brought by the new star firms will impact the incumbent firms through researching the unbalanced panel data of999343firms based on the1999-2007Chinese industrial enterprise database. There are8064new-settled star firms tested from all over the nation in this paper. In terms of type of registration, we can figure out that there is not so much difference between foreign and state-owned enterprises, which can be described as a balance situation. In terms of industrial distribution, star firms that can come from traditional heavy industry, like special equipment manufacture industry, chemical raw materials and chemical products, have a large proportion.The result is positive and proves that the star firm spillover effect owns distance sensitivity characteristic, density sensitivity characteristic and agglomeration sensitivity characteristic. Those features embody that with the distance between star firms and incumbent firms increasing, the spillover effect attenuation and that the spillover effect of the aggregates industry star firms is more than13.196%than that of the non-aggregates industry star firms. The spillover effect is more obvious when the industrial added value of new-settled star firms have a larger proportion.According to the conclusion of research analysis, we make some policy recommendations at the end of this paper. Government can change their Investment Policy to gain a strong economic growth, like introducing agglomeration industry star firms to fully make use of its spillover effect.