Ownership Structure Of FDI And Its Impact On Technology Diffusion

The rapid growth of FDI (Foreign Direct Investment) is a major hotspot of the world economy and its economic impact on the host country or the local, especially technology spillover effect has aroused theoretical circles and government departments of great concern. The slogan for exchange market for technology has been devised since1992, that is, take positive measures to attract FDI. While whether such action could help us to gain advancing technology and encourage our technology progress, namely, whether technology spillover came into being in China with FDI has brought heated dispute. At present most studies take more attention to the whole nation other than the specific province or city and the literature focuses on the influence of the ownership structure of FDI is less. The academic have two completely opposite viewpoints on its impaction on technology spillover. To make the enterprise operate smoothly, the foreign investment may transfer the advance technology to the host country in joint venture and co-operative enterprise. Therefore, the manager and the technician of the host country possibly obtain the advanced technology of management and production. At the same time, the host investor may acquire the manage experience, operation skill or other knowledge that is not painstaking passed from the foreigner through the close cooperation of the production. So, compared with individual enterprise, it is more likely to get the advantage of technology spillover in joint venture and co-operative enterprise. And other scholar arguer that though the foreign investor increase the control stock could promote the technology progress, it not always play a positive role in the domestic technology. When foreign investor has a low shareholding, it has no motivation to transfer its advance technology and that leads a low technical level. In such situation, the effect of the technology transfer, the domestic enterprise obtained, is limited. However, in Wholly Foreign-owned Enterprise, the foreigner has the whole mastery, possibly, will use more advance technology in the multinational enterprise. Therefore, the potential of technology spillover is greater in individual ownership. Although, the tradition theory considers that the tendency of independence of MNCs will has negative effects on the technology spillover, now some empirical research proved that the tendency of independence of MNCs has positive effects on the technology spillover. Other neutral opinion deems that it lies on the absorbing capacity of the honor country and so on.In fact, in some specific areas, FDI technology spillover effect may be inconsistent with the conclusions of the national sample characteristics. This paper selected Jiangsu, Zhejiang province and Shanghai to study the ownership structure’s impaction on technology spillover, in which FDI plays an important role in the whole country. Meanwhile, this area has typical significance of our economic development pattern for the manner and the way it attracting foreign investment. It is not only providing a useful reference in other regions of the country, but also helping to clear the further direction of the policy and offering suggestions to enhance the technological spillover.In this paper, an economic model based on some certain hypothesis is designed to introduce the process of the foreign investor’s tendency of independence. The result believed that when the foreign investment firstly enters to China, it is in gain experience’s stage, at this phase. As not very familiar with the culture and customs of China, its goal is expanding the market share and requires cooperation with China’s company. When in the next profit maximization stage, the foreigner is more and more familiar with China and Wholly Foreign-owned Enterprise comes into birth. Meanwhile, due to the constant improvement in the Intellectual Property Law, the foreign investment enterprise widely prefer to this pattern. That also explains the fact of tendency of independence in the MNCs.The impaction of the FDI ownership structure is analyzed through Cobb-Douglas Production Function model, with a result that, the tendency of independence is not the primary factor hindering the technical overflow. The local company although can not study and communication with the foreign enterprise inward the enterprise, the technology spillover of the individual enterprise also happens in the crosswise and the vertical exchange channel through the transfer of personnel in the industrial upstream and downstream links, the competition and imitation outside the enterprise. Generally, the foreign-owned enterprise’s technical level is higher than the joint and cooperative enterprise, in the same condition, the technology spillover may origin outside the enterprise other than within the enterprise.At last, some practical suggestions are given on the base of the empirical test. First of all, the competitive market structure is needed. The monopoly market structure is not helpful for the innovation and technology spillover. We should train powerful domestic competitor, intensify the competition between inside and outside the enterprise. Draw several mutual competitions foreign investment enterprises into the host country, not only may promote the technology inflow through the competition effect, but also accelerate the technology spillover through transfer of personnel, demonstration effect and so on. The goal and the guidance is raising the existing local enterprise’s technical level and upgrading industries. Secondly, bringing foreign capital into our country, simultaneously, we should also pay great attention to the threshold of the foreign capital to ascertain the advanced character of our technology. The object should be absorbing the one contains high technique, large production scale and with close forward-backward relation. We should encourage the vanguard technology, permit suitable technology and limit tradition technology. Guarantee that the multinational corporation has the advanced technology and creates conditions for the technical overflow. Attract the foreign research and development organization, encourage the foreign-funded enterprise, set up R&D center in the local, enhance intellectual property right protection, strengthen the public technology and special technology platform and introduce researchers. In addition, sharpen the local enterprise’s absorbency also to be essential. The low level of the absorbency has restricted the effect of the technology spillover. For only the receiver has certain technical strength, it can obtain the superiority of the technical overflow. It is a long-term trend for the MNCs to obtain the final usufruct. Therefore, we must clearly recognize the reality, maintain and strengthen our competitive advantage. That requires us to work from the source, pay attention to the educational level of various stages. The flowing of the talent is one of the technical overflow channels; therefore, we should take seriously to the talent attraction and the backflow. On one side, the foreign research center could cultivate many high-tech researchers for the host country; on the other side the MNCs always hire more native researchers, so we should concrete able person inspiriting mechanism, take measures to encourage the talented person flowing, especially foreign-funded enterprises flow into domestic capital enterprise. Finally, the policy for attraction foreign capital should transfer from the preferential benefits into rules. Formulating labor standard, environment protection standard, intellectual property rights system, completing legal system and other actions to strengthen our competition superiority could bring us into a positive cycle. At the same time, we should establish sound systems linked to international practice and cooperate with adjacent countries. Through establishing a transparent rule, a fair competition environment could be established.