Impact Of Outward Foreign Direct Investment On Total Factor Productivity In China

With the deep development of economic globalization, factor mobility between nations happens more frequently, and the effects of capital flows are arousing increasing attentions. In this international environment, this paper starts with China’s outward foreign direct investment to study the impact of OFDI on our technological progress. By carding OFDI and International Technology Spillover Theory, we analyze how the impact occurs and what factors effect on it. Afterwards, we begin with the status quo of China’s OFDI to analyze motivations for these investments. Based on DEA-Malmquist Index, we measure the changes in total factor productivity, and decompose them into technical efficiency and technological progress. In this paper,2004-2011panel data on29provinces and cities in our country are used, and OFDI, FDI, import trade and R&D investment are selected as explanatory variables to make regression analysis of total factor productivity, technical efficiency and technological progress rate respectively. Regression results show, OFDI has significantly negative effects on all above objects, suggesting that China’s current OFDI does not make a promotion but a weakening of productivity, which is contributed by both technical efficiency and technological progress rate. We have a different conclusion from most of the scholars as a result of the status quo of China’s OFDI. From the aspects of investment region and industry, technology-oriented investment accounts for a relatively small part. The results also show that domestic R&D investment is the active force to improve productivity, and mainly by affecting the rate of technological progress to improve productivity. Based on the conclusions of the study, we have the following revelations:First, at the macro policy level, grasp the key targets, actively guide the investment in high-tech industries, strengthen the devotion of science and technology, and improve science and technology innovation system. Second, at the enterprise level, enhance the ability to embed external network, improve absorption and re-innovation, and handle the relationship between innovation and digestive absorption.