FDI Technology Spillovers Within And Across Industries: Evidence From China

Xiaowen Tian
Bond University
Shuanglin Lin
University of Nebraska at Omaha

ABSTRACT

Using panel data of 11324 firms in China from 1996 to 1999, the study finds that FDI tends to generate positive technology spillovers to domestic firms within the same industry, but adversely affect productivity of domestic firms in other industries. It is also found that both the positive and the adverse effects are more significant at the local than the national level. Evidence from China thus suggests that FDI technology spillovers are in favor of domestic firms within the same industry rather than domestic firms in other industries, and are most likely to affect domestic firms within the same locality. The finding has significant implications for the study of the interaction between MNEs and local firms in emerging markets.

Keywords: FDI, Technology Spillovers, Intra-Industry, Inter-Industry, China