Return Of Overseas Talents And FDI Technology Spillover

As neo-growth theory puts it, given the limits of their own capability of innovation, one of the significant sources of technological advance for developing economies is the spillover effect of FDI. With constant deepening of globalization, new technology revolution and industrialization, the phenomenon of return of overseas talents began to emerge and this is pivotal to promote multinationals to invest in their home countries and to accelerate those countries’ integration into global economy; and due to existence of "human capital threshold" faced by multinationals when hiring local talents, the flow of returning overseas talents between multinationals and local companies constitutes a critical means of technology spillover from FDI. Since its beginning of reform and opening-up, more than400,0000among people sent from mainland China to study abroad have returned, and with the expansion of the country’s R&D investment and its higher education base, China’s human capital has experienced continuous increase in reserve and optimization in composition. In the background of relatively weak local innovation, the return of overseas talents remains an essential means of FDI technology spillover. Thus, leveraging the potentials of such returning talents and guiding their movement between FDI and local businesses are critical for China’s technology advance.Returning overseas talents play an important role in promoting national or regional economic growth, international cooperation as well as innovation, but systematical research lacks in mainland China as to returning talents in multinationals and their contribution. This paper conducts a systematical review of relevant literatures home and abroad, on this basis explores the role of returning talents in technology spillover through multinationals, then by combining theoretical and empirical methods, systematically analyzes the effect of returnees upon FDI technology spillover in China, main contents and conclusions as follows:Create a theoretical model for returnees, FDI technology spillover and their relation, thus laying the theoretical foundation for empirical study. Foreign direct investment is deemed as one of most important yet most inexpensive channels for technology spillover, while returning overseas talents is instrumental to make the best of such spillover effect.Based respectively on China’s overall and regional sample data, and using such methods as GMM dynamic panel, conduct empirical study on China’s returnees and their relation with FDI technology spillover as well as their dynamic impact, describe and analyze the trends, history between the country’s FDI and returnees. The result is that in order for China to make better use of FDI technology spillover effect and to increase contribution by FDI to its growth, the country has to improve its own absorption of FDI technology spillover; in this process, returning talents are critical to increase China’s human capital and further its absorption of technology, and the country should therefore put more resources into educating its workforce, establish a sound and orderly mechanism for talents movement, introduce appropriate incentive measures to attract more returning talents back to the country or to local companies.As the mainstream of returning overseas talents, returnees constitutes a major force for a country’s technology advance, while sophistication of local financial market is an important factor affecting technology spillover brought about by returning talents. By putting financial market into an framework for analyzing impact of returnees upon FDI technology spillover, the empirical study of this paper draws such a point:positive effect of China’s financial market upon FDI technology spillover through returning talents has begun to emerge, yet due to the non-sophistication of the country’s financial market and system, useful financial support needed for maximizing FDI technology spillover through returnees remains unavailable.This study on FDI technology spillover in China brought about by returnees has its relevance both in theoretical and realistic terms, its breakthrough lying in the following three aspects:First, this is a fresh attempt to put return of overseas talents into an analyzing framework for FDI technology spillover. This paper builds on previous studies, expands traditional analyzing framework for FDI technology spillover by introducing into it the returnees, reviews impact of international talents movement upon technology advance attributable to foreign direct investment.Second, chapter three hereof builds a theoretical model on returnees and FDI technology spillover, and within a dynamic framework, analyzes the impact of returnees upon technological advance and economical growth of developing countries. This model illustrates that returnees may lead to economic expansion of a country as the destination through FDI technology spillover. Personnel movement is a major channel for transfer of technology between parents and subsidiaries of multinationals, which occurs when overseas talents move from multinational to local companies. An analysis of factors suggests that the smaller the technology gap between a multinational and a local company is, the more significant the effect of technology spillover is.Third, chapter five hereof conducts an empirical analysis of impact upon FDI technology spillover of overseas talents return at the regional level. As the first step, this part puts returnees into a quantitative model of FDI R&D spillover, by using China’s inter-provincial panel data, investigates its impact upon the country’s technology spillover and regional variance, and further builds threshold model to gauge and analyze threshold values of each variables, finds out the relation between efficacy of financial market and FDI technology spillover attributable to overseas talents return is non-linear; then, this part further explores the role of development of financial market in overseas talent return and FDI technology spillover as well as their interacting mechanism, so as to analyze the robustness of the non-linear relation between efficacy of financial market and FDI technology spillover attributable to overseas talents return. The placement of returnees and FDI technology spillover into a single framework makes a breakthrough in China, provides the international community with China’s empirical evidence regarding the subject and offers China’s experience to developing economies in respect of leveraging the interaction between returning talents and FDI technology spillover.