Research On OFDI In Producer Services And China’s Technological Innovation

Over the past 40 years of the Reform and Opening-up,China has pursued the export-oriented strategy based on comparative advantage,deeply involved in the international division of labor,and integrated China’s manufacturing industry into the Global Value Chain.This pattern has enabled China to establish the status of "Trade Power" and "Economic Power" rapidly in the world.However,with the developments and changes of the domestic and international situation,the labor factor dividends,policy dividends,and environmental dividends on which China’s manufacturing industry depends are gradually disappearing.Especially after the global financial crisis,China’s economic growth is slowing down and enters "New Normal".The mode of development faces major adjustments.So that the core position of technological innovation in economic growth and international competition is becoming more and more highlighted.The producer services is characterized by knowledge-intensive,technology-intensive,and talent-intensive.As the industry with the highest densities of innovation factors,it gradually replaces manufacturing as a new driving force for both developed and developing countries to improve their innovation ability.Under the background of the global factor division,developed countries rely on their comparative advantages in high-end innovation factors such as technology,knowledge,and human capital to control the producer services stages of the GVC and also control the production and processing stages of developing countries.This mode of Global division of labor has lagged China’s producer services,which can not play the supporting role in the improvement of China’s technological innovation.Compared with independent innovation and traditional international innovation spillover channels,outward foreign direct investment is a new force that influences the upgrading of China’s technological innovation,and its role and status are becoming increasingly prominent.To improve the level of China’s technological innovation and achieve the goal of industrial upgrading,producer services is the key breakthrough,and OFDI is the main channel for international innovation spillovers.The continuous expansion of OFDI in producer services is the macro performance of Chinese enterprises participating actively in the international division of labor.Following the GVC,Chinese enterprises are becoming the "Integrator" of global factors and resources.They make use of OFDI in producer services to overcome the constraints of factor liquidity,acquire high-end innovation factors of developed countries,integrate and utilize global resources,and jump from GVC to global innovation chain.This is of great practical significance for the implementation of China’s innovation-driven development strategy,industrial upgrading and sustainable economic development.In the context of the global factors division,this paper attempts to analyze and test the effect of OFDI in producer services on China technological innovation systematically.The details are as follows:First of all,this paper comprehensively and systematically analyzes the status quo of OFDI in producer services and technological innovation of China,and preliminary defines the relationship between them.When measuring the global division status of China’s producer services industry,it was found that China’s producer services are generally in the middle-and low-end of the global division of labor and the disadvantages are obvious.And the proportion of service content from foreign countries in China’s exports has gradually increased.Then this paper used the data of Chinese listed companies in producer services to describe the typical facts of China’s OFDI in producer services.It is found that Chinese listed companies in producer services prefer to enter the advanced host countries with high-end factors such as technology,knowledge,and human capital.After the vertical and horizontal comparison of China’s technological innovation,it is found that there is still large technological gap with other major innovation countries such as the United States,Japan,and Germany.The ability of China’s technological innovation needs to be improved.We preliminarily determined that OFDI in producer services has a positive correlation with China’s level of technological innovation.Secondly,on the basis of the global factor division theory,this paper establishes a general equilibrium model of international specialized division of labor and analyzes theoretically the developing predicaments of producer services and technological innovation ability of developing countries.And then we argue that OFDI in the producer services is of great significance to developing countries to break through these predicaments.The main conclusions are:(1)Due to the comparative advantages in high-end scarce factors such as technology,knowledge,and human capital,developed countries specialize in producer service(innovation)stages,while developing countries are locked in processing and assembly(non-innovation)stages as a result of the limitation in the quality of factors.This division of labor has given rise to a global production and service network in order to achieve optimal allocation of resources and the proliferation of value.Enterprises can achieve global allocation of their scarce high-quality factors through the location choice of OFDI,which is available for developing countries to acquire the foreign advanced technology spillover.(2)There is home market effect in the development of producer services,so it is necessary to develop producer services in China.However the international division of labor reduces the actual income of workers in the producer service sector of developing countries including China.It must restrain the development of producer services and block up the improvement of technology innovation ability of developing countries.(3)OFDI in producer service can help to break the barriers to technological innovation and realize the innovation and upgrading of developing countries.Thirdly,to make the mechanism of reverse innovation effect of OFDI in producer services more intuitive,this paper constructs the China’s technology innovation promotion model based on OFDI in producer services.We decomposed the process into two stages that how OFDI in producer services influences China’s technological innovation ability.One is that Chinese enterprises embed deeply in GVC and make use of it.The other is that they shape China’s national value chain(NVC).In the first stage,China’s producer services take advantage of OFDI to make active arrangement,obtain foreign advanced factors.OFDI in producer service significantly improve China’s technological innovation ability through integration of factors,huge market,supporting effect of OFDI in manufacturing and reverse technology spillover effect.In the second stage,producer services play the key role as high-end intermediate input to lead the construction of China’s NVC.Relying on the import mechanism of technology and knowledge,differentiation,specialization division of labor,industry association and aggregation,producer service will drive technology innovation in domestic manufacturing industry,achieve organic interaction between high-end producer services and high-end manufacturing and improve comprehensively China’s technology innovation ability at last.Finally,this paper examines empirically the influence of OFDI in producer services on China’s technology innovation,on the micro and macro respectively.When testing the effect by the micro data of China listed companies in producer service,it is found that OFDI in producer services has a significant positive impact on China’s technological innovation.And OFDI in developed countries promote the technological innovation ability higher than in developing countries samples.While testing the impact of OFDI in producer services on China’s technological innovation from the macro level,it also confirms that OFDI in producer services has a positive impact on China’s technological innovation level.But the effect depends on the degree of integration between producer services and manufacturing industry.Otherwise,this paper examines the effect of domestic investment in innovation and other international innovation spillover channels such as international trade and FDI.The empirical results show that the improvement of technological innovation depends on its domestic R&D investment and international innovation spillovers.In addition,based on the main conclusions of theoretical model,mechanism and empirical test,the following countermeasures are proposed:(1)to comply with the development trend of global factor division and continue to promote OFDI in producer services;(2)to encourage and support the key location choice of OFDI in producer service;(3)to promote the interaction and integration of producer services and manufacturing;(4)to pay attention to the cultivation and reserve of talent;(5)to improve the level of independent research and development of enterprises.