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What Determines Technological Spillovers of Foreign Direct Investment: Evidence from China

Author

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  • Galina Hale

    (Economic Growth Center, Yale University)

  • Cheryl Long

    (Colgate University)

Abstract

Using the World Bank survey of 1500 firms in five Chinese cities, we study whether the presence of foreign firms produces technology spillovers on domestic firms operating in the same city and industry. We find positive spillovers for more backward firms. We analyze the channels of such spillovers and find that the transfer of technology occurs through movement of high-skilled workers from FDI firms to domestic firms as well as through network externalities among high-skilled workers. Moreover, these two channels fully account for the spillover effects we find, which demonstrate the importance of well-functioning labor market in facilitating FDI spillovers. Insofar as our results can be generalized to other countries, they reconcile conflicting evidence found in other studies.

Suggested Citation

  • Galina Hale & Cheryl Long, 2006. "What Determines Technological Spillovers of Foreign Direct Investment: Evidence from China," Working Papers 934, Economic Growth Center, Yale University.
  • Handle: RePEc:egc:wpaper:934
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign direct investment; technological spillovers; labor mobility; network externalities; China;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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