FDI And International Technology Diffusion: Theoretical And Empirical Study On Developing Economies

With increasing globalization, international technical diffusion plays a more and more vital role in promoting technology advancement and economic growth of various countries. Foreign direct investment was considered as one of the most important and the most inexpensive channels of international technology diffusion. The empirical studies discover that FDI has positive effects on domestic technology progress through various technology diffusion mechanisms, including competitive effects, the movement of employees, etc. However, there are some factors restricting technology spillovers.The first section of this paper is literature review on diffusion mechanisms and restrictive factors of technology diffusion. Based on the theoretical analysis, I choose 7 developing economies and Chinese different regions to test spillover effects of FDI on domestic technology progress effectively by using LP model. The result shows that there isn't yet consistent conclusion on positive spillover effects from FDI in the developing economies as a result of their different technology absorptive ability and foreign investment policy, but FDI produces important positive spillovers on local technology progress in Chinese different regions, and there exist obvious lag effects, especially on the middle and western regions. The last section summarizes the whole paper and takes forward corresponding suggestions for every countries and regions.