Technology Spillovers from FDI: The Case of ASEAN

Abstract

The effect of technology spillovers is widely considered as one of the main channels through which domestic firms benefit from FDI (Foreign Direct Investments), and plays an important role in economic development of host countries. FDI is expected to generate technology spillovers to indigenous firms in transition economies. This paper will analyse and try to figure out the development patterns of ASEAN (Association of Southeast Asian Nations) by utilizing time-series data between 1990 and 2008 in ASEAN countries. The empirical results render a support to the existence of technology spillovers in ASEAN, which have a positive effect on the economic development of ASEAN. The regression results also suggest that it is necessary to combine FDI technology spillovers with domestic human capital, that is, in the process of promoting economic development, factors such as skilled labour force and sophisticated infrastructure are crucial. China’s FDI in ASEAN requires lower education threshold, also has positive effect on economy growth in six countries of ASEAN.