How Industrial Absorptive Capacity Influences China’s OFDI Reverse Technology Spillovers?

A nation’s economic growth and its development in science and technology are driven by the technology progress,which not only depends on the nation’s domestic spending on research and development(R&D)but also relates to the international technology spillovers.Nowadays,with inadequate R&D spending and insufficient innovation ability,China lags behind in the level of science and technology compared to the developed countries.Therefore,it’s particularly important to make good use of the international technology spillover channels to promote domestic technology progress.As one of the main channels of international technology spillovers,the spillover transferred from host country to home country of outward foreign direct investment(OFDI),referred to as the "reverse" technology spillovers,has attracted extensive attention.Science technology always transmits from the leader to the laggard,the reverse technology spillovers,which are not direct technology transfers,would be associated with the destination country and destination industry.If the technology source is the external factor to obtain the reverse technology overflow,the "absorption capacity" is the internal factor.In recent years,China’s OFDI has been growing dramatically,which makes China jump to the second largest investor in the world within a short span of only 10 years.The early boom in Chinese OFDI was mainly resources-driven and occurred in developing regions,such as Asia,Africa and Latin America.Until now,China has invested to a variety of economies and industries,and its investment motivation has upgraded continuously.Chinese enterprises gradually enter into the developed countries,estalishing R&D centers,purchasing advanced enterprises and learning leading techniques.The structural changes of China’s OFDI offer the opportunity to examine the reverse technology spillovers,and the difference in industrial absorptive capacity is a good perspective to test the spillover effects.This article selects panel data of 15 specific industries from the three major industries and adopts the Malmquist index approach to calculate the total factor productivity(TFP)from 2004 to 2015.The change of TFP is decomposed into technical efficiency change and technological progress change.Through empirical analysis this article concludes that: reverse technology spillovers do exist in China’s OFDI,in which the third industry gets more increase in TFP than the first and second industry.Furthermore,the improvement in TFP from the three major industries is driven mainly by the technological progress change.Finally,the article tests the absorption capacity factors affecting reverse technology spillovers by utlizing threshold regression model and estimates the threshold level of the investment dependence,income,R&D intensity and the human capital to trigger the reverse technology spillovers.