A Study On The Effect Of FDI On Innovation Ability In China

With the acceleration of global economic integration, A country’s innovation and the development of economic are more and more easily influenced by other countries, FDI- as a carrier, influences the host country’s innovation ability directly and indirectly. Direct effects are multinational enterprise with rich management experience and advanced production technology, which has a very strong capability of technical independent innovation, and the localization of multinational corporations is a part of the host country’s economic activities, thus it can promote the innovation ability of the host country directly. The indirect effect refers to the FDI has an impact on the host country’s innovation ability through competition effect, demonstration effect, contact effect and the human resource flow effect. Since China’s accession to the WTO, foreign direct investment scale is constantly expanding, and the qualit y is continuously improved. FDI-as a combination of advanced technology, management experience and capital, its entry is bound to have profound influence on the host country’s innovation ability. How to fully absorb the advanced technology brought by FDI and re innovation, and enhance our independent innovation ability has become an urgent problem in China.First, the article analyzes the theories of how FDI influences the host countries’ innovation in the positive way and negative way, in order to lay good theoretical foundation for future empirical research. Then, the paper gives detailed analysis of the present situation of FDI and innovation ability in China, which lays the data base for empirical part. Then, the paper builds econometric model based on the previous theoretical research, and does regression analysis on the panel data of our country 2002-2013 based on different situation. Through the analysis, it is found, the point of view of the whole country, FDI can significantly promote innovation ability raise; from the point of view of the different parts of the country, eastern region while absorbs the FDI most, but FDI does not promote the improvement of innovation ability, instead, it inhibits the local innovation ability raise, the FDI of central region promotes the improvement of innovation ability significantly, the influence of the western region is positive, but the effect is not obvious. Based on this, the paper does empirical research grouped by FDI and R&D funds investment ratio. It is found, too little FDI is not conducive to the improvement of innovation ability, but this does not mean that the more absorption of FDI is better, only when the R &D investment reaches a certain amount and match with the amount of absorbed FDI, FDI can play a role in promoting innovation ability. Finally, according to the empirical research conclusions and combined with the actual situation of the China, the paper put forward relevant policy recommendations.