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  DOI Prefix   10.20431


 

International Journal of Managerial Studies and Research
Volume 6, Issue 10, 2018, Page No: 19-32

The Impact of Foreign Direct Investment (FDI) on Technological Progress and Productivity Growth - A Case Study of Chinese Industries

Lan Xu*

Business School, East China University of Science and Technology, China.

Citation : Lan Xu, The Impact of Foreign Direct Investment (FDI) on Technological Progress and Productivity Growth - A Case Study of Chinese IndustriesInternational Journal of Managerial Studies and Research 2018 , 6(10) : 19-32.

Abstract

This paper adopts the principle of Malmquist productivity growth index calculation to analyze the Chinese inward foreign direct investment (IFDI) and outward foreign direct investment (OFDI) for recent 12 years and their technological spillovers to the Chinese economy. Especially it provides a comparison among Chinese different industries and sectors. To this end, the paper uses the two-stage (parametric and nonparametric) optimization approach to estimate the elasticity of China's IFDI and OFDI that contribute to the development of domestic technological progress and productivity growth. Besides, in order to appropriately evaluate the effect of technological spillovers, this paper also utilizes the component of technological progress of Malmquist productivity growth index to measure total factor productivity (TFP) instead of Solow residual. Finally, this paper provides a comparative analysis on the effect of technological spillover across country's different industries and sectors from both the inward foreign direct investment (IFDI) and the outward foreign direct investment (OFDI). As a result, it concludes that China has attracted a significant amount of high technologies through foreign direct investment (FDI), which plays a great role in promoting the development of China's economy in recent decades. On the other side, a large-scale of outward foreign direct investment (OFDI) of Chinese enterprises is still in its infancy. Thus, the reverse technological spillover of OFDI to China is not obvious at a current stage or even has a negative impact.


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