Technology spillovers of FDI and their determinants: evidence from China

This paper aims at estimating the technological impact of FDI in China with an eight-year balanced industry level panel data set. Compared with previous studies, this paper allows for the impact of FDI to vary across time and industries, and in addition this paper also examines how the three factors, namely the technology gap, relative factor intensity, and relative labor supply, affect the technological impact of FDI. It is found that on average the FDI exerts a negative impact on domestic industries’ productivity and for a 1% increase in the technology transfer by FDI, domestic industries’ productivity will decrease by 0.1114%. However, through learning, domestic industries are handling the FDI’s challenge better and better as time goes by. The technology gap is found to play a negative role in the happening of technology spillovers, and the relative factor intensity and relative labor supply play a positive role