The Spill-over Effect Of FDI On Jiangsu Province’s Innovation Capacity

Since the reform and opening up, China’s economy has developed rapidly, inscience and technology we also have made a significant progress. Especially in thelarge international backdrop of the economic globalization, China further increases thedegree of opening up. More and more FDI is attracted, and the scale of it continues toexpand. FDI has become an important financial support for economic development, andalso an important part of China economic life. In addition, as the source power oftechnological progress, innovation plays a decisive role for sustainable economicdevelopment.. The FDI benefits the innovative activities of the host country throughsome spillover channels, such as reverse engineering, skilled labor turnover,demonstration effects and the relationship between supply and demand. Therefore,China as the largest developing country in FDI inflows, in the strategic request oftransforming the mode of economic development, under the international backdrop ofthe Western developed countries’ technology blockade and monopoly of the coretechnology, how to make better use of FDI, optimize the structure of utilizing FDI andtake advantage of foreign capital’ positive effect in such as promoting independentinnovation, industrial upgrading and coordinated regional development directlydetermines whether we can achieve success of our strategy of building aninnovation-oriented country.Jiangsu, as one of a economic province in our country, is not only a national leaderon the road of innovation and development, but also has successfully attracted a hugeamount of FDI because it has unique geographical advantages (it is adjacent toShanghai, located in the Yangtze River Delta area) abundant labor resources and goodinfrastructure. Entering of FDI not only increasingly makes Jiangsu province an majorundertaking of the developed countries transferring international industry andtechnology, but also have an important impact on the innovative capability of localenterprises. With the continued scientific and technological innovations progress,Jiangsu province, as a knowledge and innovative source, fully plays its own role ofundertaking and radiating and thus to play an important role in promoting China’soverall technological innovation and industrial upgrading. So research on the spillovereffects of FDI on local enterprises innovation capability in Jiangsu Province not onlyhas very important practical significance for their own economic development ofJiangsu Province, but also has important guiding significance of the whole of China’s economic development strategic plan.This study is on the basis of extensive literature at home and abroad, firstly wemake a simple exposition of the basic theory of innovation and FDI technologyspillover effect, and analyze the meaning of innovation and the FDI spillover channels,as well as the main factors influencing them. Secondly, we visually show FDI inflowsand the development of innovation in Jiangsu Province in recent years with data andcharts. Then based on the front theoretical analysis, the theoretical model is established,and we make an empirical analysis of FDI technology spillover effect on innovationusing municipal data of Jiangsu Province from2003to2009. Finally we explain theresults of empirical analysis economically, analyze the reasons for this result and basedon these make relevant policy recommendations: fully playing the FDI positive impacton the innovation, improving efficiency in the use of foreign capital and effectivelyenhancing the international competitiveness of the enterprises in Jiangsu provinces.