FDI technology spillovers and spatial diffusion in the People’s Republic of China

Lin, Mi and Kwan, Yum K. (2013) FDI technology spillovers and spatial diffusion in the People’s Republic of China. In: Asian International Economists Network (AIEN) on “Trade Competitiveness in a World of Rapid Change: What are the Challenges and Opportunities for Asian Economies?”, 22 March 2013, ADB HQ in Manila.

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This paper investigates the geographic extent of foreign direct investment (FDI) technology spillovers and diffusion in the People’s Republic of China (PRC). We employ spatial dynamic panel econometric techniques to detect total factor productivity (TFP) innovation clusters, uncover the spatial extent of technology diffusion, and quantify both the temporal and spatial dimensions of FDI spillovers. Our empirical results show that FDI presence (measured as employment share) in a locality will generate negative and significant impacts on the productivity performance of domestic private firms in the same location. Nevertheless, these negative intra-regional spillovers are found to be locally bounded. Domestic private firms enjoy positive FDI spillovers through interregional technology diffusion via labor market channels; these interregional spillovers appear in spatial feedback loops among higher-order neighboring regions. In the long run, the positive interregional spillovers outweigh the negative intra-regional spillovers, bestowing beneficiary total effects on domestic firms through labor market channels. FDI spillovers measured as sales income share, however, are negative in both intra-regional and interregional dimensions.

Additional Information:ADB Working Paper Series on Regional Economic Integration Publication Stock No. WPS136062
Keywords:FDI spillovers, Chinese Economy, Spatial diffusion
Subjects:L Social studies > L140 Econometrics
L Social studies > L160 International Economics
L Social studies > L100 Economics
Divisions:Lincoln International Business School
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ID Code:17846
Deposited On:10 Jul 2015 14:12

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