The Research On Technological Progress Effects Through The Outward Foreign Direct Investment Of China

For a long time, the relevant problems of the international capital flows are always the importment field that international economics studies. The rapid developments of international capital flowing between the developed countries as well as the developed countries invest to the developing countries in recent years. The new trend of international capital flow has appeared. The developing countries also begin to "going out" and carry out external direct investments to the developed countries. This reason of capital flows and the reverse technological progress effect through outward foreign direct investment (ODI) are inseparable. The technology sourcing ODI of the developing countries has become an important way to gain the advanced technology from developed host countries. With the acceleration of economic globalization and the rising growth of China’s economy, a large number of enterprises begin to allocate resource from the globle angle and expand outward foreign direct investments. In an opening economy condition, how China’s enterprises improve their independent innovation capability already becomes a new method for building an innovation-oriented country.China’s economic development has got remarkable achievements since1978. But the total technogical level has not been taller than compared with the developed countries. The policy of attracting foreign direct investment (FDI) has carried out technological spillovers. With the fact that the continuous changing of global economic pattern, only depending on the FDI to gain technological spillovers could not satisfy our country economic growth. We need to digest, absorb and re-innovate advanced technology in many channels in order to gain and hold on to a dominant position in international competition. As an important flow of international capital, ODI ought to become the complement. China is the largest developing country in the world and the great power that attracts FDI, the technological spillovers of international investment should become the important approach promoting Chinese technological progress. Therefore, it is very important that how to make use of the technological spillovers from ODI and FDI.This paper consists of theoretical and empirical study. Firstly, this paper has defined the concepts of ODI and technological progress, and proposed a theory analysis frame include technology spillovers, technology innovation and outward foreign investment (ODI). And this paper has analsized the reverse technological spillovers effect through ODI, home countries of foreign direct investment promotion mechanism of technological innovation and affecting factors, and constructed the corresponding measurement model. This paper has also researched the development of China’s ODI from the scale, industry, subject, region, and done the international comparison with the G-7countries. From the conlusion, the development of China’s ODI has been rapid in recent years, but remained behind the overall size, the amount of technology-seeking ODI has been small, and investment regional has been too concentrated. After the above theory has been analyzed, this paper has carried on the empirical research on the reverse technological spillovers effect on the basis of the current situation of China’s ODI. And it find that China has obtained technological spillover effect through ODI and the China’s ODI to the developed countries and areas has a significant role in promoting in the home country’s technological progress.Furthmore, this paper has analyzed the technological innovation effect of ODI. It has discussed the input and output activities of technological innovation and done an international comparison with G-7countries from the expenditure on R&D and the amount of patents applications accepted and granted. The results have showed that although China’s expenditure on R&D was increasing year by year, but the R&D intensity is not high, basic research and applied research into the proportion of low and too little invention patents. Meanwhile, this paper has analyzed the home country’s technological innovation effect through ODI from R&D inputs and outputs. The results have showed that China’s ODI brought a positive influence on domestic technological innovation, and larger than the foreign direct investment on the domestic R&D inputs and the amount of invention patent granted. The effects of ODI on domestic innovation outputs (patents granted) are larger than on innovation inputs (R&D capital stock). And the effects of ODI on the amount of invention patents granted are greater than the amount of total patents granted. This shows that China’s ODI can bring technology innovation effect to the home country, and it become an important channel for obtain foreign advanced technological spillovers.A country’s degree of the technological progress effect through ODI is subject to multiple factors, and this paper has classified the main factors into the host and home countries. It included the home country’s the technological absorption ability, real effective exchange rate and the level of financial development, but also the host country’s technological innovation capacity, the level of economic development and openness. We found that China’s real effective exchange rate decreased year by year with the growing level of financial effects of technological progress on the ODI’s played a certain role. And there is no effective promotion of China’s foreign direct investment and technological progress effect because of the less investment in R&D activities, financial investment in education and human capita. The R&D capital stock of host country is the primary factor. Finally, based on the theoretical analysis and empirical results, we have proposed related policies and recommendations to expand ODI and raise the digestion, absorption and re-innovation ability. Firstly, the lever of China’s ODI should be raised to enrich "going out" strategy connotation. Secondly, China’s enterprises should be encouraged to carry out the technology sourcing ODI in order to quicken the pace for abroad technology to introduce to China. Thirdly, we should drive the development of the science and technology actively to enhance the domestic strength of science and technology. Finally, the educational and R&D investment should be increased to improve the digestion, absorption and re-innovation ability.