Study On Reverse Technological Spillover Effect Of China's OFDI And Domestic Technological Progress

Knowledge production and human capital accumulation are the source of economic growth. Continuous technological progress and innovation is the mainspring of a nation's economic growth. With the progress of globalization, the developing countries which are not affluent in technology factor are able to get advanced technology and managerial expertise through outward foreign direct investment (OFDI) besides independent innovation. The existing researches in technological spillover of OFDI focus mainly on investment from developed countries to developing countries and have made great progress; whereas very few, if any, researches focus on OFDI from developing countries to developed countries and further analyze the influence of such investment over domestic technological progress of parent's nations. International division of labor is deepening and gradually evolving into division in the global value chain. Developing countries join the global value chain with their advantage in labor resource and obtained interest fro division of labor, however, most of them are locked in the low end of value chain due to their lack in such strategic factors imperative to value chain as technology and brand. Therefore, these is significant theoretical implication to explore the theoretical feasibility and micro-mechanism for developing countries to take the advantage of knowledge spillover through OFDI and further test the influence of our OFDI over domestic technological progress. It also holds value for practitioners on strengthening and improving the macro-management of OFDI, as well as updating value chain of domestic countries.The practice of China's OFDI provides perfect foundation for both theoretical analysis and empirical study of reverse technological spillover of OFDI. Based on the fact that international division of labor is evolving into the division of labor among various process of the value chain, and China's enterprises are moving upward from the low end of global value chain, this paper explores how to realize technological progress of parent nation through technological spillover effect of investing outward. This paper attempts to answer the following questions:first, what's the micro-mechanism of OFDI enterprises in developing countries obtaining technological spillover from hosting countries? What are the factors which impact on the spillover effect? Second, dose our OFDI promote domestic technological progress? What are the factors that impact on the absorption of reverse technological spillover? Is it possible for domestic companies to realize the upward movement in the value chain through OFDI?This research consists of theoretical analysis and empirical study. It employs both quantitative and qualitative (case analysis) methods. The following conclusions are drawn:Firstly, companies in developing countries are able to obtain reverse technological spillover from hosting countries through OFDI to developed countries. The precondition is that the global market size of the investing companies is large enough, and the wage rate of the industry is relatively high.Secondly, as to the micro-mechanism of obtaining reverse technological spillover and the corresponding influential factors, there are great differences between green field investment and cross-border merger and acquisition (M & A). Companies in the producers-driven value chain can employ both green field and M & A to obtain advanced R & D technology, whereas companies in the customers-driven value chain should employ M&A to access resources such as brand and channel to realize upgrading in value chain.Thirdly, our OFDI impacts on domestic technological progress through stimulating domestic technological innovation and domestic diffusion of reverse technological spillover. Empirical study employing R&D input and patent authorization shows that the influence of OFDI over domestic R&D input and output is not significant. However, although the effect of domestic diffusion effect of reverse technological spillover is still weak, it has promoted continuous improvement of total factor productivity through absorption mechanism of R&D factors and feedback mechanism of R&D outputs. The nurture and accumulation of high-quality talents is critical to improve absorption capability of reverse technological spillover.This research consists of seven chapters. The first chapter is introduction, which introduces the background and purpose of this research, research methods employed, theoretical framework, structure and contribution, as well as definition of some major concepts. Chapter 2 is literature review. It synthesizes and provides comments on existing literature on global value chain, OFDI and its technological spillover effect, points out that there is lack in micro-mechanism of spillover effect. Chapter 3 is theoretical framework and micro-mechanism analysis of reverse technological spillover of OFDI. It constructs theoretical framework and elaborates the micro-mechanism and influential factors of green field and M & A. Chapter 4 analyzes various investment methods of various types of companies in order to move upward in value chain through OFDI. It combines the division and evolvement of driving mechanism of global value chain, and indeed amends and perfects the micro-mechanism framework in Chapter 3. Chapter 5 is empirical analysis on impacts of OFDI on technological progress of hosting nation in the macro level. Data in OFDI flow, R&D input and patent authorization are employed to test the level of influence. Cluster analysis is employed to measure the level of influence and mechanism of OFDI over technological progress in China as well as factors which impact on absorption capability. Chapter 6 is case analysis of OFDI in value chains with various driving force. Huawei in telecommunications equipment manufacturing industry and TCL in home appliances industry are selected. Research conclusion, policy suggestion and prospect are given in Chapter 7.This paper has done exploratory research in the following aspects:Firstly, this research examines reverse technological spillover in OFDI, as well as diffusion mechanism in hosting nation from the perspective of global value chain. It puts forward policy suggestion to stimulate OFDI and technological progress and hence provides new channel for China's companies to improve competitive advantage in the global value chain.Secondly, this research elaborates the micro-mechanism and influential factor of reverse technological spillover of OFDI in developing countries. Theoretical framework is constructed and its feasibility to companies in various value chains is compared, which fills up the theoretical gap in academia.Thirdly, empirical study employs R&D input, patent authorization and total factor productivity separately to examine the spillover effect of OFDI in domestic technological progress. Aggregate and cluster analysis are employed for 25 major destination countries and area of China OFDI to compare the influence of OFDI location over domestic technological progress.