TITLE

FDI TECHNOLOGY SPILLOVERS IN CHINA: IMPLICATIONS FOR DEVELOPING COUNTRIES

AUTHOR(S)
Vai Io Lo; Moxi Song; Xiaowen Tian
PUB. DATE
April 2015
SOURCE
Journal of Developing Areas;2015 Special Issue, Vol. 49 Issue 6, p37
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
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.
ACCESSION #
108548232

 

Related Articles

  • Correction.  // Newsweek (Pacific Edition);8/30/2004 (Pacific Edition), Vol. 144 Issue 9, p8 

    This article presents a correction to the article "Profit and the Poor," in which we cited an article from Foreign Policy magazine that said low-wage earners from the 18 largest developing nations take in $1.7 billion a year. The amount, in fact, is $1.7 trillion.

  • The Secret to Future Growth. Florida, Richard // Newsweek (Atlantic Edition);1/30/2006 (Atlantic Edition), Vol. 147 Issue 5, p38 

    This article looks at how developing countries are making attempts to develop their workforces and economies in the effort to better compete in the world market. The author reviews the forthcoming Annual World Economic Forum in Davos, Switzerland, where world leaders will reportedly focus on...

  • The Secret to Future Growth. Florida, Richard // Newsweek (Pacific Edition);1/30/2006 (Pacific Edition), Vol. 147 Issue 5, p26 

    This article looks at how developing countries are making attempts to develop their workforces and economies in the effort to better compete in the world market. The author reviews the forthcoming Annual World Economic Forum in Davos, Switzerland, where world leaders will reportedly focus on...

  • Greenfield investments, cross-border M&As, and economic growth in emerging countries. Hiep Ngoc Luu // Economics & Business Letters;Sep2016, Vol. 5 Issue 3, p87 

    This paper investigates the effect of foreign direct investment (FDI) on economic growth in emerging countries through its two major entry modes: Greenfield investments and cross-border mergers and acquisitions (M&As). We found that both Greenfields and M&As contribute positively to accelerating...

  • FACTORES DETERMINANTES DE LA EMISIÓN DE INVERSIÓN DIRECTA EXTRANJERA: UN PROCESO DE ACUMULACIÓN DE CAPACIDADES1. Álvarez, Isabel; Torrecillas, Celia // Revista de Economía Mundial;2013, Issue 34, p21 

    The internationalization process of firms through foreign direct investment (FDI) responds to an individual decision, and for that reason much of the analysis on this has been done at the microeconomic level, revealing that the presence of certain ownership advantages would justify the emergence...

  • SUMARIO ANALÍTICO.  // Revista de Economía Mundial;2013, Issue 34, p5 

    No abstract available.

  • ANALYTICAL SUMMARY.  // Revista de Economía Mundial;2013, Issue 34, p9 

    No abstract available.

  • FOREIGN DIRECT INVESTMENT FLOWS: AN EXAMINATION OF ITS DISTRIBUTION AMONG MIDDLE- AND LOW- INCOME COUNTRIES. Manrique, Gabriel; Vlad, Val // Global Conference on Business & Finance Proceedings;Jun2011, Vol. 6 Issue 2, p639 

    The potential effects that foreign direct investment (FDI) has on growth and employment have led many developing countries to compete for FDI. In a period of rapid globalization (with countries increasingly aware of the importance of FDI) the competition for FDI inflows has become intense. In...

  • Greenfield Foreign Direct Investment Versus Cross-Border Mergers and Acquisitions. Klimek, Artur // Eastern European Economics;Nov/Dec2011, Vol. 49 Issue 6, p60 

    Firms can generally access foreign markets through exporting or local production. If a firm considers production in a host country, it must decide whether to acquire an existing company or to create a completely new establishment. The latter issue has been less frequently addressed in the...

Share

Read the Article

Courtesy of THE LIBRARY OF VIRGINIA

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics