Technology Spillover Effect Of Foreign Direct Investment In China

Developing countries work for more of foreign direct investment (FDI), one of the important reasons is to get the benefits of spillovers of FDI. However, a lot of studies indicate: the spillovers of FDI can be positive or be negative, and the number of spillovers is affected by lots of factors.There are two micro-mechanisms of spillovers of FDI: the first one is the factors of firms. The differences of scale, property rights, strategy and human capital between firms will lead to different spillovers; the second one is the relations between firms. There are three kinds of local firms according to the relations between the local firms and foreign firms. They are competing with foreign firms, cooperating with foreign firms and indirect links with foreign firms. The relations are different, so the spillovers are different. The more the foreign firms' technologic actives, the more the spillovers produced. Based of this hypothesis, this paper made a external economies model, and the model describes how the cost of government distinguishing spillovers, the forms of favorable terms, and the degree of favorable terms determine the spillovers of FDI.There are two middle-mechanisms of spillovers of FDI: the first one is transferring firms' level to industries level. Foreign firms cause positive spillovers to several local firms, but cause negative spillovers by drawing demand from local firms, the net effects is uncertainty; the second one is the market structures. There are huge different spillovers in different market structures. Foreign firms in market structure of monopoly will produce the least positive spillovers.There are two macro-mechanisms of spillovers of FDI: the first one is knowledge accumulation. One of the important opinions of new growth theory is knowledge accumulation is the power of growth. The spillovers of FDI make contribute to knowledge accumulation, and this paper made a model for the contribution; the second one is absorb ability of host country. Absorb ability is the ability of firms in host country imitate, learn, and apply the technologies of foreign firms. This paper made an index system of absorb ability, and estimated 15 countries indexes of absorb ability.All the three levels of analysis are assisted by positive analysis. This paper also analyzes spillovers how affected by foreign firms' collecting, the different spillovers between FDI and international trade, and the spillovers of FDI in other countries. At the last, paper analyzes the foreign investment policy and their affection to spillovers. Based of the analyzed in theory, positive, and policy, paper gave some suggests to promote the positive spillovers of FDI in our country.