Spillover Effects Of Foreign Direct Investment In Technology

Since 1990s, China has experienced a booming economy and also fast accumulation of foreign direct investment (FDI), for which the Yangtze River Delta is most prominent. It has been a ubiquitous fact that FDI is an important vehicle for technology diffusion and the diffusion effect of technology and management is conducive to the economic development of the amphitryon. However, the econometric tests for technology diffusion are widely disputed. By using the model that embodies technology diffusion of FDI, this paper establishes the econometric model in consistence with China's situation. The model tests the existence of technology diffusion and its mechanism, utilizing panel data from 1990-2005 of 16 cities in the Yangtze River Delta. The result shows that technology diffusion has a positive effect on the economic development of this area, and its effect is highly combined with human capital, that is, technology diffusion of FDI in this area contributes to economic growth through the human capital.