Analysis Of Technology Spillover Effect Of FDI On Jiangsu And Guangdong Domestic Industry

China has absorbed a great deal of foreign investment since reform and open-up and become the most important FDI destination in the developing countries. Currently, goals of absorbing foreign investment are to gain FDI technology spillover effects and to promote Chinese technology advancement, which are different from the goal in the time of initial stage of reform and open-up period when foreign investment was mainly used to recover the short of domestic capital and foreign currency. However, there are still disputes in academic circles about whether FDI can bring about plus technology spillovers to domestic industries and how can domestic industries gain spillovers better, which are just this paper's research aims.This paper takes Jiangsu and Guangdong where there are most foreign investment in China as research subjects and comparatively analyzes magnitude and influencing factors of FDI technology spillover effects to domestic industries in both provinces to study general rule of technology spillovers, in order to offer some beneficial references to improve the quality of using FDI in these regions, even in the whole country. Firstly, this paper reviews relevant literature on technology spillovers at home and abroad, makes some comments and then, studies connotation, generation mechanism, and influencing factors. Secondly, the paper introduces and compares general situation of using FDI in both provinces during these years; the paper then sets up a metrology model on panel data of industry economy during 2002-2007 to transversely compare existence and magnitude of spillovers in both provinces, and vertically compare the different channels of technology spillovers---intra-industry and inter-industry spillovers in each province. Empirical study shows that there are significant FDI spillovers on Jiangsu and Guangdong's domestic industries, which is inseparable with high level of economy, technology and society development, open policy and good market environment; the spillovers on Jiangsu domestic enterprises are better than those in Guangdong and the effects of intra-industry spillovers are bigger than those of inter-industry, which mainly result from characteristics of abilities to absorb technology, FDI origins, FDI Industry orientations and FDI use models in Jiangsu and Guangdong. On the base of empirical study, the paper brings about an enterprise case to study how advanced technologies flow to domestic enterprises from multinational corporations as well.The paper holds that influencing factors of FDI technology spillover effects on Chinese domestic industry include technical level of domestic enterprises, human capital quality of host country, technical content of FDI, market lead type of multinational corporations and so on. The government and domestic enterprises should determine appropriate strategies and policies for foreign capital, positively promote domestic industries'ability to absorb advanced technology from multinational corporations, continuously optimize favorable outside environment for technology spillovers, in order to stimulate FDI spillovers to Chinese domestic enterprises.