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Technological Upgrading in Chinese Cities: The Role of FDI and Industrial Structure

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  • Le Tang
  • Yuyao Zhang
  • Jingyi Gao
  • Fan Wang

Abstract

Foreign direct investment (FDI) has long been regarded as a key source of new knowledge external to the domestic economy, but relatively little is known about how the host regions’ technological upgrading is affected by industrial structure in terms of considering cognitive proximity. This article explores how industrial structure, whether related or unrelated, influences technological upgrading within and across cities. Based on a panel dataset on 239 Chinese cities in 2001–2009, our empirical results show that FDI spillover has a positive effect on local technological upgrading in both nearby and neighboring cities. Therefore, in Chinese cities, related industrial variety significantly enhances FDI spillover, while unrelated industrial variety diminishes FDI spillover. Only related industrial variety has a spatial effect, and it facilitates technology transfers and disseminations of FDI across cities. Our empirical evidence has implications at both the theoretical level and for policy making.

Suggested Citation

  • Le Tang & Yuyao Zhang & Jingyi Gao & Fan Wang, 2020. "Technological Upgrading in Chinese Cities: The Role of FDI and Industrial Structure," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(7), pages 1547-1563, May.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:7:p:1547-1563
    DOI: 10.1080/1540496X.2018.1562900
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    Cited by:

    1. Tang, Le & Sun, Shiyu & Yang, Weiguo, 2021. "Investments in human capital: The evidence from China’s new rural pension scheme," Research in International Business and Finance, Elsevier, vol. 55(C).
    2. Zhizhong Liu & Guangyue Liu & Xu Han & Yingna Chen, 2022. "Green Technology of Foreign Direct Investment on Public Health: Evidence from China," Sustainability, MDPI, vol. 14(20), pages 1-16, October.

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