Abstract
As an external factor, FDI's spillover plays an important role in improving innovation capability of local firms in China. By integrating FDI's spillover, intellectual capital with innovation performance, this paper builds a conceptual model to explain how FDI's spillover affects innovation capability by intellectual capital. By questionnaire analysis of 240 local firms in Yangtze River delta and structure equation model, this study demonstrates that FDI' spillover has a significant role in improving firms' intellectual capital and innovation capability by demonstration effect, labor mobility effect and linkage effect. In addition, this paper provides some theoretical guidelines and suggestions for local firms to improve their innovation capability.
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