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Foreign Direct Investment, Absorptive Capacity and Regional Innovation Capabilities: Evidence from China

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  • Xiaolan Fu

Abstract

Innovation has widely been regarded as one of the main drivers of economic growth in the knowledge economy. This paper investigates the impact of foreign direct investment (FDI) on the development of regional innovation capabilities using a panel data set from China. It finds that FDI has a significant positive impact on the overall regional innovation capacity. FDI intensity is also positively associated with innovation efficiency in the host region. The strength of this positive effect depends, however, on the availability of the absorptive capacity and the presence of innovation-complementary assets in the host region. The increased regional innovation and technological capabilities have contributed further to regional economic growth in China's coastal regions but not in the inland regions. It concludes that the type and quality of FDI inflows and the strength of local absorptive capacity and complementary assets in the host regions are crucial for FDI to serve as a driver of knowledge-based development. Policy implications are discussed.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Oxford Development Studies.

Volume (Year): 36 (2008)
Issue (Month): 1 ()
Pages: 89-110

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Handle: RePEc:taf:oxdevs:v:36:y:2008:i:1:p:89-110

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Cited by:
  1. Jean Ruffier, 2008. "China Textile in Global Value Chain," Post-Print halshs-00649972, HAL.
  2. Chen, Fang & Mohnen, Pierre, 2009. "FDI, R&D and Innovation Output in the Chinese Automobile Industry," MERIT Working Papers 044, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. Pradhan, Jaya Prakash, 2013. "The Geography of Patenting In India: Patterns and Determinants," MPRA Paper 50595, University Library of Munich, Germany.
  4. Jing Lan & Makoto Kakinaka & Xianguo Huang, 2012. "Foreign Direct Investment, Human Capital and Environmental Pollution in China," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 51(2), pages 255-275, February.
  5. Zhu, Shujin & Fu, Xiaolan, 2013. "Drivers of Export Upgrading," World Development, Elsevier, vol. 51(C), pages 221-233.
  6. Fu, Miao & Fu, Xiaolan & Li, Tieli, 2008. "International and Intra-national Technology Spillovers and Technology Development Paths in Developing Countries: The Case of China," Working Paper Series RP2008/96, World Institute for Development Economic Research (UNU-WIDER).
  7. Iwasaki, Ichiro & Suganuma, Keiko, 2014. "Foregign Direct Investment and Regional Economic Growth in Russia: An Econometric Assessment," RRC Working Paper Series 44, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
  8. Metaxas, Theodore & Kechagia, Polyxeni, 2012. "F.D.I. through the imitation procedure The case of China: A Note," MPRA Paper 40886, University Library of Munich, Germany.
  9. Fu, Xiaolan & Pietrobelli, Carlo & Soete, Luc, 2011. "The Role of Foreign Technology and Indigenous Innovation in the Emerging Economies: Technological Change and Catching-up," World Development, Elsevier, vol. 39(7), pages 1204-1212, July.
  10. Wang, Yuandi & Zhou, Zhao, 2013. "The dual role of local sites in assisting firms with developing technological capabilities: Evidence from China," International Business Review, Elsevier, vol. 22(1), pages 63-76.
  11. Jean Ruffier, 2012. "China Clothing Industry in World Textile Value Chains," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 4(3), pages 21-40, October.
  12. Fu, Xiaolan & Gong, Yundan, 2011. "Indigenous and Foreign Innovation Efforts and Drivers of Technological Upgrading: Evidence from China," World Development, Elsevier, vol. 39(7), pages 1213-1225, July.

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