Outward Foreign Direct Investment, Reverse Technology Spillovers And Home Countires’ Technology Progress

The study of reverse technology spillovers belongs to the research field ofinternational technology spillovers. The research of international technologyspillovers originated from the importance of technology in the development of acountry’s economy and the depening of the world’s economic integration. Nowadays,technology becomes more and more important to a county’s national power while thecompetition between countries becomes more and more fierce.Although there may be a lot of international economy activities that consist oftechnology spillovers, researchers of international technology spillovers mainlyconcerns three of them: outward foreign direct investment, inward foreign directinvestment, and the import of goods and services.Nearly two decades ago, Lichtenberg and Porterie started toresearch reversetechnology spillovers.Some researchers followed them to re-study the problem andtried to make some developments. But until now, the study of reverse technologyspillovershas been limited due to the scarce of data. In all the studies that we can find,most of them thought that reverse technology spillovers contribute to the technologyof home countries.Standing on the theory of international technology spillovers and the theory of“absorptive capacity”, after a proper development of the theories and researchmethods, this paper wants to solve the following problems: Could reverse technologyspillovers that China’s firms got overseas promote China’s technology? If reversetechnology spillovers that China’s firms got cannot promote China’s technology, whatcan be the proper reasons? In order to analyse the reason, this paper also studies thefollowing problem: Does China’s R&D capital stock or human resources show someabsorptive capacity to reverse technology spillovers, and whether or not there is“threshold effect”?Besides, this paper gives some policy advicesin the last chapter.There are two main innovations in this paper:1) Bringing “reverse humancapital spillovers” into the research field of reverse technology spillovers, and thusbringing “human capital spillovers” into the research field of international technology spillovers.Classical studies used “R&D capital spillovers” to substitute technologyspillovers, however, the measurement of “R&D capitalspillovers” only considersR&D capital, ignores human capital. Chapter1will explain why I introduce “humancapital spillovers” to the research field.2) On the basis of absorptive capacity, offeringthe concept of “restraining effect”. Traditional researchers hold the view that R&Dcapital or human resources of home countries could show some absorptivecapacityand accelerate the absorption of reverse technology spillovers, but I think thatthere also can be some kind of “restraining effect” between the R&D capital orhuman resources of home countries and reverse technology spillovers, that is, theR&D capital or human resources of home countries may restrain the effect of reversetechnology spillovers.Chapter1is the introduction of the whole paper. In chapter one, I will introducethe problems this paper wants to solve, explain some concepts, show the logic andarrangement of the paper, and I will also introduce the research methods, innovationsand imperfections of the whole paper.In chapter2, I will introduce the theoretical basis of the paper. The study of thispaper stands on three theories: the theory of international technology spillovers, thetheory of absorptive capacity, and the theory of “strategic asset” seekingforeign directinvestment. This paper builds research method on the theory of internationaltechnology spillovers and the theory of absorptive capacity, and offers policy adviceson the theory of “strategic asset” seeking foreign direct investment.Chapter3makes some proper developments to the research of reversetechnology spillovers. This chapter offers research methods to the next chapter, andits empirical studies’ results have some guiding value for China, too. Thischapterbuildstheoretical models to illustrate how reverse technology spillovers affecthome countries’ technology; and the models also explain “restraining effect”; besides,the models illustrate home countries’ strategy to maximize their technology underconstraints. Then this chapter uses empirical studies to test the models. The empiricalstudies of chapter3uses the data of OECD countries, and the main discoveriesare:1)Reverse technology spillovers can promote home countries’ technology;2) Homecountries’ R&D capital stock and human capital show some “restraining effect” to reverse R&D capital spillovers respectively;3) Home countries’ human capital showssome “restraining effect” to reverse human capital spillovers.Chapter4is the core of the whole paper. In this chapter, I will study China’ssituation so as to solve the problems chapter1has put forward.The first part of chapter4studies the history and status quo of China’s outwardforeign direct investment, this part mainly studies the industry distribution and areadistribution of China’s outward direct investment, and it also studies China’sinvestment in the main economic integrities. The discoveries are:1) In the recentyears, China’s manufacturingfirms’ outward foreign direct investment take a smallportion of the whole outward foreign direct investment of China,2) China’sinvestment in developed countries began to increase，and most of the firms thatinvested in developed countries were mamufacturing firms(except for some countries,for example, Australia, Russian). This paper hold the view that manufacturing firms’outward direct investment is the maily way to get reverse technology spillovers, anddeveloped countries (or some newly industrialized countries) are the main resourcesof technology spillovers. Thus, China’s outward direct investment may get somereverse technology spillovers from overseas.The second part chooses some China’s firms to study their outward directinvestment in detail, and I find thatthose firms can get some reverse technologyspillovers from host countries like USA, Japan, UK, France, Germany, Korea,Singapore, etc.. And I also find that reverse technology spillovers can promote thetechnology of those firms.The increase of firms’ technology may contribute to thetechnology progress of China, thus the study of this part lays a foundation for thefollowing study.Using the research methods built in chapter3, the third partresearches therelationship betweenreverse technology spillovers and China’s technology (TFP), andin order to analyse the reason, this part also studies whether China’s R&D capitalstock/human resources shows some absorptive capacity or “restraining effect” toreverse technology spillovers. The main discoveries are:1)From1985to2008, as awhole, reverse technology spillovers cannot promote China’s technology;2) China’shuman capital shows some absorptive capacity to reverse R&D capital spillovers, and reverse R&D capital spillovers could promote China’s technology if China’s humancapital exceeded“threshold”, that is, from2001, reverse R&D capital spillovers couldpromote China’s technology after being absorbed by China’s human capital;3)China’s R&D capital stock shows some absorptive capacity to reverse humancapital spillovers, and reverse human capital spillovers could promote China’stechnology if China’s R&D capital stock exceeded“threshold”, that is, from2004,reverse human capital spillovers could promote China’s technology after beingabsorbed by China’s R&D capital stock.Chapter5concludes the whole paper, sums up the main discoveries of the paper,and offers some policy advices.Theories of international technology spillovers hold the view that reversetechnology spillovers can promote the technology of home countries. Chapter3’stheoretical models and empirical studies supportit. As for China, chapter4finds thatsome China’s firms benefit from reverse technology spillovers they got overseas, buthowever, from1985to2008, as a whole, I didn’t find some remarkable and positiverelationship between reverse technology spillovers and China’s whole technology.The positive findsare:1)China’s human resources show some absorptive capacity toreverse R&D capital spillovers, and reverse R&D capital spillovers could promoteChina’s technology if China’s human capital exceeded “threshold”;2) China’s R&Dcapital stock shows some absorptive capacity to reverse human capital spillovers, andreverse human capital spillovers could promote China’s technology if China’s R&Dcapital stock exceeded “threshold”.Then I give some proper reasons, put forwardsome policy advices, point out the feasible development path of China’s outwardforeign direct investment in the future, thus the study of this paper becomesmeaningful.