Towards FDI and technology spillover: A case study in China

Abstract

Technology spillover has played an important role to promote technology innovation of indigenous firms in emerging countries. In this paper, the effects of technology spillover in Shanghai, the largest city attracting FDI in China were examined. Roll regression on the basis of panel data and co-integration on time series during the period from 1981 to 2004 are employed. The results from the two methods were compared. It is indicated that the increase of foreign direct investment (FDI) restrains, rather than promotes the technology increase of indigenous firms. The research has revealed that FDI has negative effects of technology spillover on indigenous firms in Shanghai, China.