Study On Foreign Direct Investment Technology Spillover

Foreign Direct Investment (FDI) has positive impacts on the economic growth in developing countries. It helps to increase capital stock, improve investment quality and ease the employment pressure, and so on. People generally believe that foreign direct investment helps the host country walk into endogenetic economic growth path through technology spillover, which is the most fundamental impact on host country's economic growth.With China becoming the largest host country which absorbs the most foreign direct investment in developing countries, there are more and more researches on FDI technology spillover in China. However, most researches focused on intra-industry technology spillover and there were few empirical researches on inter-industry technology spillover. More and more scholars suggest that FDI technology spillover may occur in inter-industry rather than intra-industry. Besides, as the most important sector in China, manufacturing industry has absorbed about 2/3 of national foreign direct investment. Using 208 panel data of 26 industries in manufacturing sector from 1999 to 2006,we particularly focus on FDI inter-industry technology spillover and several impact factors in this paper. Then we analyse and compare these two forms of FDI technology spillover. Using relevant information of Input-output table, we rearrange and calculate "the direct consumption coefficient" and "the direct distribution coefficient" for the 26 manufacturing sub-sectors, to measure FDI forward and backward linkages effect. Then we particularly focus on four factors which affect FDI technology spillove: time trend, industry linkages, industry concentration and the technological gap. At present, researches focus on impact factors such as the industry concentration and the technological gap. However, little attention is paid to impact factors such as time trend and industry linkages. In this paper we use grouping test and multiplication equations test, which together strengthen the credibility of this article's conclusions.As a whole, we found positive FDI intra-industry and backward linkages spillover, negative FDI competition and forward linkages spillover. Backward linkages spillover is more important and significant than other forms of technology spillovers. Besides, with the technology gap between domestic and foreign enterprises becoming smaller and smaller, FDI technology spillover will disappear over time. Finally, Industry linkages, industry concentration and the technology gap each has different impact on the industrial added value of domestic enterprises and FDI technology spillover.