A Study On The Effect Of FDI’s Directed Technical Change

Cutting-edge literature has begun to focus on directed technical change and its impact on technological innovation,income distribution and economic growth.However,few literatures have discussed the source of China’s directed technical change.FDI has long been considered as an important way of transnational diffusion of technology.In 1993,China became a developing country that attracted the most foreign investment in the world.In 2019,China attracted 941.5 billion yuan of foreign investment,a year-on-year increase by 5.8%.Under the background of continuous decline in global cross-border direct investment for many years,China’s absorption of foreign capital has been growing against the trend and remains the second largest foreign capital inflow country in the world.FDI flow is an international transfer of many factors including capital,advanced technology and management experience.It is vital for developing countries with a relatively backward economy and technology to utilize foreign capital to promote their technological progress and realize economic growth.FDI will affect China’s directed technical change through its horizontal spillover effect and vertical spillover effect.Promoting the technological progress to the direction of domestic factor abundance through FDI and giving full play to the advantages of factor endowment to promote independent innovation are the major issues facing China’s high-quality development of the economy.Therefore,it is important to explore how FDI affects the direction of China’s technological progress from the perspective of the transnational transfer of the directed technical change.In this dissertation,taking the effect of FDI’s directed technical change as the research topic and combing the related theories and cutting-edge literature,I established a theoretical framework based on the impact of FDI technology spillover on technological progress within and between industries.I introduced two types of FDI technology spillover,namely,vertical spillover and horizontal spillover and examined the heterogeneity mechanism of them that affects the directed technical change.By constructing industry and provincial FDI horizontal spillover,forward spillover and backward spillover indicators,and using long-panel data to investigate the effect of FDI technology spillover on the direction of technological progress,I analyzed heterogeneous impacts based on different sources and regions.Meanwhile,under the perspective of the new economic geography,I scientifically characterized and optimized the endogenous space-time weight matrix,selected the most suitable spatial econometric model in the universal nested spatial econometric model,and analyzed the spatial spillover effects of FDI horizontal spillover,forward spillover and backward spillover in neighboring areas to the local directed technical change.Finally,I introduced the technology gap and human capital constraints to group the data endogenously to identify the effects of the constraints on the national and provincial dimensions.The main research contents of this dissertation are as follows:First,by constructing the endogenous growth model of domestic and foreign investment sectors to investigate the mechanism of FDI’s effect on directed technical change of the host country,I clarified FDI’s demonstration and competitive spillover and personnel flow spillover,as well as the forward and backward spillover of FDI on directed technical change.Based on theoretical discussion,four hypotheses on FDI horizontal spillover,three hypotheses on FDI forward spillover and three hypotheses on FDI backward spillover were proposed.Second,China’s directed technical change was measured in all aspects.Based on the CES production function,the directed technical change parameters of industry,province and nation were estimated by using the standardized three equation system model to estimate.And then,the directed technical change index of three dimensions was measured according to the corresponding parameters and the data collected.Thereafter,the results were sorted out and analyzed.Third,based on the panel data of the two dimensions,that is,industry and province,and from the perspective of FDI horizontal spillover,the panel model was used to develop a regression analysis of FDI horizontal spillover on China’s directed technical change.Furthermore,the horizontal technology spillover path of FDI was divided into two channels: demonstration and competitive spillover as well as personnel flow spillover.Panel regression analysis was carried out on provincial-level samples.Besides,heterogeneity analysis was conducted to distinguish different sources of foreign investment,eastern and western regions,technology gap and human capital constraints.The spatial econometric model was also used to empirically test the spatial spillover effect of inter-provincial FDI horizontal spillover on the directed technical change.Fourth,the FDI vertical technology spillover were divided into two channels:forward spillover and backward spillover,and their influence on directed technical change were tested from the national and provincial dimension respectively.The provincial-level samples were further tested to distinguish different sources of foreign investment and the robustness and heterogeneity of eastern,central and western regions.By using a spatial econometric model,I examined the spatial spillover effects of FDI forward spillover and backward spillover of the neighbor provinces on the provincial directed technical change.Finally,from the two constraints,namely,technology gap and human capital,and based on the grouping method of the panel with endogenous threshold,I analyzed the non-linear effects of FDI forward spillover and backward spillover on the directed technical change.The results showed that in the sample period from the perspective of the whole country(sub-industry),FDI horizontal spillover promoted the technical progress of the whole country(sub-industry)to labor.The influence of FDI on directed technical change was restricted by human capital,which significantly promoted the directed technical change to labor-biased after it is lower than the threshold value.From the perspective of provincial regions,FDI horizontal spillover path was further divided into two channels:demonstration and competition spillover and personnel flow spillover.It was found that both channels significantly promoted provincial technical change to labor-biased.After grouping different sources of FDI and regression analysis,the effect of FDI demonstration and competition spillover in Hong Kong,Macao and Taiwan on directed technical change was stronger than that in non-Hong Kong,Macao and Taiwan,both of which had the same effect direction on promoting labor-biased technical change.The effect of FDI personnel flow spillover from Hong Kong,Macao and Taiwan on directed technical change was stronger than that from non-Hong Kong,Macao and Taiwan,both of which had the same effect direction on promoting labor-biased technical change.For Hong Kong,Macao and Taiwan or non-Hong Kong,Macao and Taiwan themselves,the spillover intensity of FDI personnel flow was stronger than FDI demonstration and competition spillover.After grouping the samples into eastern and western regions and conducting the regression,it was found that only in the eastern region did FDI spillover affect technical change in a significant way to labor-biased,while in the central and western regions,only FDI personnel flow spillover affected technical change in a significant way to capital-biased.The spatial econometric model was further used to analyze the inter-provincial spatial spillover effect of FDI horizontal spillover,and the SAR model was selected as the optimal spatial econometric model.It was found that the effect of both the neighboring provinces of FDI demonstration and competition spillover and the FDI personnel flow spillover on provincial technical change were positive,consistent with the direct effect direction.However,the spatial spillover effect of FDI personnel flow spillover was greater.At last,technology gap and human capital constraints were imposed.Both FDI demonstration and competition spillover and FDI personnel flow spillover had a single threshold effect.The smaller the technology gap was,the more FDI demonstration and competitive spillover and FDI personnel flow spillover promoted technical change to labor-biased.When the human capital level was lower than the threshold,FDI demonstration and competition overflow and the FDI personnel flow spillover significantly promoted technical change to labor-biased;when the human capital level was higher than the threshold,the intensity of FDI personnel flow spillover promoting technical to labor-biased decreased significantly,and FDI demonstration and competition spillover did not significantly affect directed technical change.From the perspective of FDI forward spillover,its linear impact on the technological progress of the national manufacturing industry was negative during the sample period,i.e.labor-biased.There was no non-linear constraint of technology gap identified but a single threshold effect based on human capital.When FDI forward spillover was lower than the threshold value,it promoted technical change to labor-biased;when it exceeded the threshold value,the impact was not significant.The linear effect of FDI forward spillover on the provincial directed technical change was not significant,while the regression coefficient of FDI forward spillover in Hong Kong,Macao and Taiwan was significantly positive and the regression coefficient of FDI forward spillover in non-Hong Kong,Macao and Taiwan was negative but not significant.Only FDI forward spillover of the eastern region among the eastern,central and western regions significantly promoted technical change to capital-biased.The results of spatial econometric regression showed that SEM was the best model,and FDI horizontal spillover from neighboring provinces had a positive effect on the directed technical change of the province which is consistent with the direct effect direction.