FDI technology spillover and threshold effect of the technology gap: regional differences in the Chinese industrial sector.

Abstract

This paper presents a new perspective that there is a double-threshold effect in terms of the technology gap existing in the foreign direct investment (FDI) technology spillover process in different regional Chinese industrial sectors. In this paper, a double-threshold regression model was established to examine the relation between the threshold effect of the technology gap and technology spillover. Based on the provincial panel data of Chinese industrial sectors from 2000 to 2011, the empirical results reveal that there are two threshold values, which are 1.254 and 2.163, in terms of the technology gap in the industrial sector in eastern China. There are also two threshold values in both the central and western industrial sector, which are 1.516, 2.694 and 1.635, 2.714, respectively. The technology spillover is a decreasing function of the technology gap in both the eastern and western industrial sectors, but a concave curve function of the technology gap is in the central industrial sectors. Furthermore, the FDI technology spillover has increased gradually in recent years. Based on the empirical results, suggestions were proposed to elucidate the introduction of the FDI and the improvement in the industrial added value in different regions of China.