Competition, And Agglomeration Of Fdi Technology Spillover

Under the background of globalization, many countries strive to attract foreign direct investment (FDI) hoping that technology brought by multinationals will spill over to domestic industries and increase their productivity. Since reform and opening up, our country have made a big success in facilitating FDI flows. In this paper we investigate empirically whether FDI in our country generates positive technological externalities on local producers. If it does, through what channels does the technology diffuse and what factors affect this process? In view of the above questions, both intra- and inter-industry effect are considered.By calculating the basic matrix of 2002 input-output tables of China, we get the matrix of direct input coefficients; based on the Malmquist productivity index, total factor productivity (TFP) can be measured. R&D and export are also included in the model as control variables. We also examine how competition and geographic concentration affect productivity of domestic firms and what role they play in accounting for the extent of spillovers from foreign presence.The sample for the analysis contains 28 manufacturing industries from 2001 to 2006, our main findings are: (i) FDI generates strong and positive spillover effects on TFP of local firms through both intra- and inter-industry (forward and backward linkages included) linkages. Likewise, export and R&D are positively correlated with the productivity of domestic firms. (ii) The degree of competition and concentration generates considerable effect on the spillover of FDI.(iii)intra-industry spillover effect is competition, information-driven, promoted by the competition and concentration degree of related industries; backward spillover effect is source-oriented, mainly determined by the will of spill source; forward spillover effect is applicable technology-oriented, not restricted by low degree of competition or concentration.