Foreign Direct Investment Technology Spillovers Research Articles

FDI technology spillovers in Chinese supplier-customer networks

This paper examines foreign direct investment (FDI) technology spillovers between firms in a supply chain and analyzes the mechanism behind their occurrence. Results using firm-level transaction data from China between 2009 and 2020 show that, unlike inter-industry linkage effects, in the Chinese market, FDI technology spillovers can directly occur through connections between suppliers and customers, demonstrating the existence of inter-firm technology spillover effects of FDI. Further analysis reveals that FDI technology spillovers between firms are generated through channels of knowledge transfer and optimized supply chain configurations, predominantly observed in state-owned firms, small and medium-sized firms, the manufacturing sector, and high-tech industries. Upon analyzing the detailed breakdown of FDI sources, it was found that FDI from developed countries exhibits inter-firm technology spillover effects. In contrast, FDI from Hong Kong, Macao, and Taiwan regions, developing countries, and tax havens such as the British Virgin Islands and the Cayman Islands show insignificant effects on inter-firm technology spillovers. These conclusions offer policy insights for China and other developing countries to better utilize FDI to promote the development of local firms in the context of the sustained global supply chain restructuring.

Does Institutional Distance Affect Transnational Knowledge Spillovers Between Countries?

This article studies the impacts of the institutional distances between home and host countries on technology spillovers and reverse technology spillovers of multinational investment. Extant research has studied the impacts of the technological spillover effects of foreign direct investment (FDI) and outward FDI (OFDI) on the technology innovation of home and host countries and the impact of the institutional environment on the technological spillovers of transnational investments. However, these studies have failed to distinguish the impacts of institutional profiles and institutional distances on multinational investments. The impacts of institutional profiles and institutional distances on cross-border business activities require additional, diligent theoretical and empirical research. We believe that the technological spillovers of multinational enterprises (MNEs) are affected not only by their institutional environments but also (and perhaps more importantly) by the institutional distances between home and host countries. We used data for Chinese investment in 11 countries over the past 15 years, and the analytical results showed some interesting conclusions. China's OFDI has not produced significant technology spillover effects, so overseas investment by MNEs needs to be more mature and return to rationality. However, FDI has a significant technology spillover effect, and institutional distance has indeed hindered FDI technology spillovers in China.

Spatial impact mechanism of Chinese technology diffusion on CO2 emissions in the countries along the Belt and Road Initiative.

International climate and green technology cooperation under the Belt and Road Initiative (B&R) have attracted significant attention, which led to several studies exploring B&R carbon emissions from the perspective of driving factors. While existing studies fail to consider the diversification of China's technology spillovers, the stochastic impacts by the STIRPAT and GWTR models are integrated in this study to determine the spatial impacts of three types of international technology spillovers (i.e., foreign direct investment (FDI), imports, and migrants) on the carbon emissions of B&R countries through independent innovations and technology following during 2003-2018. China's FDI and migration technology spillovers will increase B&R countries' CO2 emissions through independent R&D and technology following, while imported technology spillovers will decrease B&R countries' carbon emissions through the same means. Therefore, this study shows that China's three technology spillovers show spatial differences in the CO2 emissions of B&R countries. In short, government departments should formulate low-carbon technology policies according to the technology impact path and regional characteristics.

FDI, Technology Spillovers, and Green Innovation: Theoretical Analysis and Evidence from China

Foreign direct investment (FDI) technology spillovers play an increasingly important role in a host country’s development. Evaluating the positive effect of FDI inflows on green innovation is essential for correct city design. Based on the panel data of 262 cities in China from 2004 to 2018, we first analyzed the impact of FDI technology spillovers on green innovation in Chinese cities and then tested the threshold effect in four absorptive capacity factors: environmental regulation, economic growth, human capital, and industry size. Finally, we compared the time and space of two types of cities crossing the threshold from the perspective of innovative and non-innovative cities. The results show that FDI can significantly promote green innovation in Chinese cities and the promoting effect of FDI on green innovation has nonlinear characteristics, namely, such effects only make sense when absorptive capacity is above the threshold points. Additionally, among the four absorptive capacity factors, the development degrees of innovative cities are ahead of non-innovative cities; in particular, there is a significant difference between them in terms of economic growth. Local governments should develop reasonable policy combination tools according to the absorptive capacity characteristics of different cities to effectively promote the technology spillover effect of FDI and achieve coordinated ecological and economic development.

The impact of FDI technology spillover on the innovation quality of Chinese enterprises: a microperspective based on geographic proximity

PurposePrevious studies have reached inconsistent conclusions on foreign direct investment (FDI) technology spillovers and corporate innovation. The main purpose of this paper is to explore the technological spillover effects of FDI from the microperspective of firm linkages induced by geographic distance. Further analysis is conducted on the impact and mechanism of this spillover on the innovation quality of Chinese enterprises. The conclusions drawn from this paper can guide Chinese enterprises' foreign capital utilization and innovation strategy choices.Design/methodology/approachUsing the data of China's A-share listed companies from 2009 to 2019, this paper explores the role of FDI technology spillover in enterprise innovation quality through a two-way fixed-effect model. The robustness of the results is proven by substituting variables, adding industry fixed effects and excluding high-profit groups, and further using the two-stage least squares (2SLS) method to alleviate the empirical endogeneity problem.FindingsThese findings indicate that FDI technology spillover based on geographic proximity has a positive impact on the innovation quality of Chinese enterprises. However, there are different impacts for different types of enterprises. FDI technology spillover has a positive impact on the innovation quality of non-state-owned enterprises (non-SOEs) and small- and medium-sized enterprises (SMEs), while it has no effect on state-owned enterprises (SOEs) and large enterprises. The authors also find that the degree of financing constraints and R&D investment are important transmission mechanisms between FDI technology spillover and enterprise innovation quality.Research limitations/implicationsThis study ignores industry characteristics when considering foreign enterprises around Chinese enterprises. In fact, technology spillover effects differ across industries. When the authors matched microdata to regions, only the provincial level was considered. Therefore, there is still room for further research. In future research, the authors should consider industry characteristics and group foreign enterprises and Chinese enterprises in the same industry and in different industries to explore industry differences in technology spillover. In addition, when matching corporate data to regions, the authors can match to the city level and draw city-level conclusions.Practical implicationsThis study is different from previous studies that focus on the quantity of enterprise innovation or innovation output. The authors focus on the role of technological spillovers in the quality of Chinese enterprise innovation, enriching research in the field of enterprise innovation quality. In addition, the current FDI technology spillover indicators are technically difficult to measure at the micro level. The authors draw inspiration from the theory of the geographical structure of financial supply and combine the creation methods of macro and micro indicators in existing articles in other fields. The authors ingeniously construct a new FDI technical spillover indicator. This indicator combines the commonly used regional FDI technology spillover with the geographic proximity of enterprises at the microlevel by constructing an interaction term between the two. This indicator not only alleviates the endogeneity problem to a certain extent but also has implications for future research in the field of FDI technology spillovers at the micro level.Social implications(1) FDI technology spillovers are an effective way to improve the innovation quality of local enterprises, especially for non-SOEs and SMEs. Therefore, The authors suggest that in the context of dual circulation, the Chinese government should continue to open wider to the outside world and encourage foreign enterprises to invest in China. (2) In future development, managers of SOEs and large enterprises should create an innovation incentive mechanism. Moreover, they should change their vertical management structure and make full use of their policy advantages and budget advantages to increase innovation activities. In the process of acquiring technology spillovers, enterprises need to solve their own financing constraints.Originality/valueFirst, this study solves a technical problem. It is technically difficult to measure the current FDI technical spillover indicators at the micro level. This study innovatively constructs a new FDI technology spillover indicator that combines regional FDI technology spillovers with the microperspective of the geographical proximity of enterprises. This approach not only alleviates certain endogeneity problems in the empirical evidence but also enriches relevant research in the field of technology spillover. In addition, this study focuses on the impact and mechanism of this spillover, which addresses the current research gap among previous studies that mainly focus on innovation quantity and ignore innovation quality.

Does Energy Efficiency Benefit from Foreign Direct Investment Technology Spillovers? Evidence from the Manufacturing Sector in Guangdong, China

Given that energy is a significant input factor for modern economic growth, which has also brought the most severe negative externalities damage to the environment, improving energy efficiency is considered critical globally. As a large energy producer and consumer, China faces challenges from both the economy and the environment. This study used the generalized method of moments estimation techniques to examine the impact of foreign direct investment (FDI) technology spillovers on energy efficiency in a sample of manufacturing industries. A super-efficient data envelopment measure of energy efficiency is examined. The novelty of this study is that it analyzes both the quantitative and qualitative values of various spillover effects at the industry level. Using a panel data set on 26 manufacturing industries in Guangdong Province of China covering the period 2000–2018, the empirical results show a positive and statistically significant relationship between FDI competitive effects and energy efficiency. In contrast, this relationship is in the opposite position when demonstration effects of FDI technology spillovers occur. The results also show these effects have more impact to the low or middle energy consumption industries. The study provides a reference for the formulation of the FDI strategy and energy policy in the manufacturing sector.

Threshold Effect of Foreign Direct Investment and Carbon Emissions Performance From the Perspective of Marketization Level: Implications for the Green Economy.

Exploring the path and mechanism of marketization level in the effect of foreign direct investment (FDI) on carbon emission performance will help to maximize the stimulation effect of foreign investment on green and low-carbon development. This study used the panel data of 11 provinces and cities in the Yangtze River Economic Belt from 2008 to 2016. A panel threshold model is constructed to explore the non-linear relationship between FDI and carbon emissions performance from the perspective of marketization level. The main conclusions are as follows: First, from the perspective of marketization level, a significant double threshold effect exists between foreign participation and carbon emission intensity, with threshold values of 4.4701 and 9.2516 respectively. Second, as the marketization level increases, the technology spillover effect of FDI increases, and the stimulation effect of foreign participation on carbon intensity decreases significantly, but it does not inhibit carbon intensity, indicating that the overall benefits brought by FDI technology spillovers are still insufficient to offset pollution caused by foreign investment. Third, the eastern region of the Yangtze River Economic Belt has crossed the second threshold. In the central and western regions, the marketization process is relatively slow except for Chongqing, and the regions are still firmly stuck between the first and second thresholds. In response to the conclusions of the empirical research, relevant policy suggestions are put forward from three dimensions, namely, the strategy of introducing foreign investment, construction of the marketization system, and environmental regulation, to achieve low-carbon and green development in the Yangtze River Economic Belt.

TECHNOLOGY TRANSFER AND MANUFACTURING PERFORMANCE: NIGERIA’S COINTEGRATION AND CAUSAL EVIDENCE

This paper investigates the long-run and causal relationships of technology spillovers on manufacturing performance in Nigeria using the share of Foreign Direct Investment (FDI) in gross fixed capital formation as a proxy for technology transfer for the period 1981 to 2019 in a Vector Error Correction Model (VECM). The FDI stock appears to be too low at less than 1% of capital formation to generate any significant positive spillovers on manufacturing performance, resulting in an insignificant negative long-run relationship and the absence of causal relationships. The size of the local market has the most significant positive long-run effect on manufacturing performance, and the causality for this effect is one-way from manufacturing. A one-way causality was also observed from manufacturing to income per capital, though the long-run effect was significantly negative. The paper concluded that FDI technology spillover is presently not a major factor in Nigeria’s manufacturing performance. This may be redressed with policies aimed at increasing FDI inflows, increasing the technology-learning capacity of local firms and their vertical integration with foreign firms, and the creation of national infrastructure for technology development and diffusion

Cross-national knowledge transfer, absorptive capacity, and total factor productivity: the intermediary effect test of international technology spillover

ABSTRACT Knowledge has become the most important factor of production with the emergence of the knowledge economy. We use the system GMM estimation method to analyze how cross-national knowledge transfer (CNKT) impacts the total factor productivity (TFP) of China’s 31 provinces and evolution of China’s ability to absorb foreign knowledge. We also examine the possible intermediary effects of foreign direct investment (FDI), outward FDI, import trade, export trade, and direct technology spillovers between CNKT and TFP. We find that: (1) CNKT improves China’s TFP and positively impacts FDI, import trade, export trade, and direct technology spillover; It shows that CNKT not only helps to improve China’s TFP, but also provides innovative knowledge reserve for the absorption of international technology spillovers. (2) The improvement in the domestic infrastructure construction level, R&D capacity, human capital, economic development and openness has obvious absorption effect on CNKT, which is conducive to the absorption and utilisation of international advanced knowledge. (3) FDI, import trade, and direct technology spillover play a partial mediating role between CNKT and TFP, and the intermediary effect of import trade technology spillover is the strongest.

Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution

In recent years, China has gradually become one of the countries with the largest levels of foreign direct investment (FDI). FDI has played a significant role in promoting Chinese economic development, and the FDI technology spillover effect is one of the core forces driving China towards reaching new growth milestones. Therefore, due to the country’s interest in development, there is competition for FDI throughout China. However, the existing imperfect environmental protection system cannot prevent FDI from flowing into China’s highly polluting and resource-intensive industrial chain, possibly causing serious environmental problems. Therefore, the topic of properly introducing foreign capital to promote development and effectively end China’s current environmental pollution crisis has become a research focus. To explore FDI’s impact on China’s economic growth, technological innovation, and environmental pollution, we use Chinese provincial panel data for 2004–2016 to construct a dynamic panel simultaneous-equation model. Considering the interrelationships between the equations, we construct economic models of economic growth, technological innovation, and pollution emissions, and incorporate them into the same research system for generalized method of moments (GMM) estimation. Our results show that FDI has a significant and positive direct impact on China’s economic growth and technological innovation, and can furthermore have a significant pull effect on the domestic economy through the backward spillover channel. At the same time, FDI has a direct and significant impact on the increase in regional waste-water discharge, while exhibiting a pollution halo effect on the emission of sulfur dioxide (SO2) and chemical oxygen demand (COD) emissions directly. In addition, we observe “benign feedback mechanism” between technological innovation output and these three types of pollution, namely SO2 emission, COD emissions, and ammonia and nitrogen discharge.

Does foreign direct investment enhance or inhibit regional innovation efficiency?

PurposeThe purpose of this paper is to examine whether foreign direct investment (FDI) inflow impacts on regional innovation efficiency in China and whether the impacts of FDI are contingent on regional conditions that may maximize the effect of FDI on regional innovation efficiency.Design/methodology/approachUsing panel data of 30 provinces from 2000 to 2010, the authors first used data envelopment analysis to measure regional innovation efficiency, followed by a spatial panel model to test research hypotheses concerning the effect of FDI on regional innovation efficiency and the direct and moderating effects of regional characteristics such as regional innovation environment, regional absorptive capacity and regional complementary assets.FindingsThe paper finds that there are considerable inter-regional and intra-regional variations in innovation efficiency in China and that regional variations in innovation efficiency in China can first be explained by the differences in inflow FDI and then be accounted for by the direct and moderating effect of regional innovation environment, absorptive capacity and complementary assets.Research limitations/implicationsThe research findings have three policy implications. First, governments should continue their efforts to increase the transparency and predictability of the framework for inward FDI and align FDI with the region’s strategic priorities of development to improve innovation efficiency. Second, governments should develop holistic and coherent policies that address the key aspects of regional conditions conducive to the inflow of FDI. Third, governments at the regional level should cultivate an open innovation environment and support the development of financial markets to maximize the positive effect of FDI technology spillover and externalities.Originality valueThis paper fills a gap in research on the spatial heterogeneity characteristics of spillover effects of FDI on regional innovation efficiency.

Productivity Spillovers from FDI, Absorptive Capacity and Self-innovation Capabilities of Resource Area: Evidence from 1992–2013 in Shanxi, China

The resource areas development is facing increasingly serious challenge in post-crisis era; it is essential to propose a reasonable approach for improving the self-innovation capability of resource area by using technology spillover of foreign direct investment (FDI) and applying absorptive capacity as the conduction medium. Based on the development characteristics of resource areas, the ‘micro-meso-macro’ view three-dimensional conceptual framework of FDI spillover, absorptive capacity and self-innovation capability was constructed. Then, the empirical analysis was conducted in three steps: first, the FDI technology spillover effects between Shanxi and three eastern provinces (Jiangsu, Liaoning and Hebei) were compared; second, the absorptive capacity and the relative factors were compared; third, by taking Shanxi province as an example, the relationship between FDI technology spillover and the self-innovation capacity was verified and the conduction medium role of absorptive capacity was investigated. Finally, by combining the theoretical and empirical analysis, three suggestions were put forward for reference.

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

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.

Fdi technology spillovers in China: Implications for developing countries

Since the 1980s, multinational corporations (MNCs) have increasingly invested in production and service facilities in developing countries. In the meantime, developing countries adopted preferential policies to attract foreign direct investment (FDI) in the hope that FDI can bring in advanced technology. However, FDI is a double-edged sword, generating positive as well as negative technology spillovers. Extant studies focus on the simple issue of whether the presence of FDI affects domestic firms, and have limited policy implications for developing countries. This paper is intended to fill this research gap. Differing from extant studies, the paper tries to identify the individual channels through which positive and negative FDI technology spillovers take place in different entry modes, and draws practical implications for developing countries in making policies on MNC entry modes and investment priorities. The paper distinguishes between different forms of FDI presence, including tangible assets and intangible assets, exported products and domestically sold products, new products and traditional products, employment of skilled workers and employment of unskilled workers, and takes them as different channels by which FDI technology spillovers take place. Meanwhile, the paper distinguishes between wholly foreign owned enterprise and joint venture, and takes the two entry modes as different organizational settings in which FDI technology spillovers occur. The paper then examines how FDI technology spillovers take place through each of these channels under each of the entry modes, and tests hypotheses against firm-level data from China. The study finds that positive FDI technology spillovers take place through tangible rather than intangible assets, domestically sold rather than exported products, traditional rather than new products, and employment of unskilled rather than skilled workers in joint ventures. In contrast, negative FDI technology spillovers take place through exported products and employment of skilled workers in wholly foreign owned enterprises. The findings suggest that developing countries should encourage MNCs to enter their markets in the form of joint ventures rather than wholly foreign owned enterprises. Moreover, they should encourage MNCs to invest in tangible assets, production of domestically-consumed products and traditional products, and employment and training of unskilled local workers in joint ventures. Furthermore, they should help domestic firms overcome the adverse effect of market stealing and skill stealing generated by wholly foreign owned enterprises.

Is FDI Spillover Conditioned on Financial Development and Trade Liberalization: Evidence from UMCs

Developing countries take Foreign Direct Investment (FDI) as leverage for economic growth and development as a result of FDI technology spillovers. However, the effect of FDI inflows on economic growth of host countries is conditional on the abilities of those countries in absorbing and accumulating external knowledge. The related literature paid particular attention to the role of the financial system and trade liberalization of recipients. Thus, this paper investigated empirically the intermediary roles of the financial system and trade liberalization as Absorptive Capacity (AC) factors on the FDI led growth nexus. This study provided data evidence from 33 Upper-Middle-income Countries (UMCs) over the period of 1990–2011 to contribute to the existing literature. This empirical study employed the dynamic panel “difference” GMM estimator proposed by Arellano and Bond (1991); since it prevents the biases inherent to economic growth models including auto-correlation, unobserved heterogeneity, and endogeneity between explanatory variables. The results indicated the development of the domestic financial system facilitated FDI technology spillovers in order to enhance the economic growth of UMCs. However, the empirical findings also showed a negative effect of trade openness on stimulating the FDI spillovers.

Managing FDI technology spillovers: A challenge to TNCs in emerging markets

Prior studies on foreign direct investment (FDI) technology spillovers have offered little guidance to transnational corporations (TNCs) on how to protect and exploit technology across borders. The present paper argues that TNCs can manage technology spillovers through selection of entry modes, selection of technologies, and selection of investment priorities in the affiliates they establish in foreign markets. A number of hypotheses are derived from theoretical analyses and are tested against firm-level data from China. The findings of the paper have significant implications for TNCs that face fierce competition from local firms in emerging markets.

Double-edged effects of the technology gap and technology spillovers: Evidence from the Chinese industrial sector

Abstract This paper proposes a new insight that the technology gap plays double-edged roles in the technology spillovers of foreign direct investment (FDI) through two channels, technology choice set and technology absorptive capability. Applying a multiple-threshold model, we examine the non-linear relationship between the technology gap and technology spillovers based on the provincial panel data of the Chinese industrial sector during 1993–2006. The empirical results support the hypothesis of two thresholds, which are 0.3071 and 0.5214 in terms of the technology gap respectively. The estimated thresholds indicate the sufficient absorptive capability is the premise for FDI technology spillovers. Moreover, it implies the marginal decrease of FDI technology spillover effects in the long run.