Research On Threshold Effect Of FDI On Regional Technology Progress

The scale of foreign direct investment has been expanding all the time, and finally ranked first in the world in 2014 for the first time as foreign capital reached 119 billion 600 million US dollars. Through the foreign direct investment the host country may have the opportunity to study and master the advanced technology from the country producing technology spillover, but trying to quickly upgrade the level of technology and spread this technology spillover to the entire industry, regions and even the whole country, it needs a set of excellent technical absorption capacity system. The fact is that the FDI technology spillover effects are not the same in all regions of China,it means not all areas are able to get the positive spillover from foreign direct investment. Parts of China pass the threshold of economic development by virtue of their strong economic base and digestion and absorption capacity can better absorb and use the advanced technology spillover, foreign investment will have a positive technology spillover to these places. While other areas that have not yet crossed the threshold cannot be. This in fact means that there is a certain "threshold" of the spillover effect of foreign direct investment, and the spillover of foreign investment will be fully revealed when the comprehensive absorptive capacity of the area reaches a certain level. There, it is practically meaningful to analyze the “threshold”.This paper analyzes the threshold effect of FDI on technical progress in 29 provinces and autonomous regions of China by combining quantitative and qualitative analysis method. Firstly, it gives a statistical description of the total amount of FDI inflow, industrial distribution and location selection based on relevant data of "China Statistical Yearbook" and "provincial statistical yearbook". Secondly, the non-dynamic panel regression model is constructed to analyze the influence of threshold effect on the relationship between FDI and technological progress, which is based on the selected panel data from 2000 to 2013 and the human capital, the financial depth, the R&D density and the technical gap as the threshold variable. Finally, the paper compares the specific values of each threshold variable in 2013 and the estimated threshold values, so as to determine which threshold range is located in the region.The result shows the empirical results support the hypothesis of one threshold for human capital as well as financial depth, two thresholds for R&D density as well as technology gap. There is a significant difference in the FDI spillover effect between different threshold ranges, the single threshold variable only shows the positive spillover effect when it passes the minimum threshold value. When the double threshold variables are in the middle of the two threshold value, the positive FDI spillover effects are the most significant.As a conclusion, this paper puts forward several suggestions to improve the utilization of FDI, such as adjusting the location layout of foreign capital macroscopicly, Increasing investment in more than secondary education, perfecting financial structure, encouraging foreign-invested companies to localize scientific research activities and enhancing the independent innovation capability of enterprises.