The Effect Of Tendency Of Whole Owned Subsidiary For Spillovers From FDI

Since the Reform and Opening up of China, Foreign Direct Investment (FDI) flowing into China has been rapidly increasing. Meantime, the proportion of whole owned subsidiary has been increasing, which has become the most important form of FDI. In China, this trend is described as the tendency of whole owned subsidiary. We use the theoretical analysis and empirical analysis methods in order to research how the tendency of whole owned subsidiary influences the international technology diffusion and the host countries'progress of technology. In the theoretical analysis part, firstly we summarize how the technological progress influences the economic growth. And we derive the path of technological development from the Romer's theory. Then considering the characteristics of the technology in the various stages of the development, we analyze the path of technology spillovers of FDI and its mechanism. And we analyze how the tendency of whole owned subsidiary influences the various paths of technology spillover, then we construct the R-C model based on the results of the former analysis. In the empirical analysis part, we extend the Cobb-Douglas production function, introducing the technological progress deriving from domestic R&D and technological spillover deriving from FDI, in order to examine the influence of technological spillover. Then we use the panel data of 1998-2008 regional and sub-industry for statistical analysis. It concludes that in general FDI in China has an adverse effect for technological progress, especially the negative effects for domestic enterprises are more significant. However, the tendency of whole owned subsidiary can reduce such adverse effects. Finally, in this paper we put forward some relevant policy suggestions.