The impact of China’s outward foreign direct investment on domestic innovation

Zhixiao Dong, Zhuang Miao and Yan Zhang

Journal of Asian Economics, 2021, vol. 75, issue C

Abstract: This paper explores the reversal technology spillovers of outward foreign direct investment (OFDI) on Chinese firms. Combining a uniquely merged database of Chinese firm-level OFDI and patent data and applying the Propensity-Score-Method-Difference-In-Differences (PSM-DID) methodology, we find a positive causal effect of OFDI on invention patent applications. Some estimations of heterogeneous effects show that OFDI promotes invention patent applications for private enterprises but has mute impact on state-owned and foreign-owned enterprises. With respect to OFDI host countries, OFDI toward developed countries is more effective for promoting innovation activities than developing countries. Three potential transmission channels of OFDI are empirically tested: direct technology purchases, access to high-tech inputs, and international mobility of personnel. Lastly, some policy implications are raised for China’s “Going Out” strategy and the economic development driven by innovation.

Keywords: Outward foreign direct investment; Patents; Innovation (search for similar items in EconPapers)
JEL-codes: F23 O31 O33 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:75:y:2021:i:c:s1049007821000361

DOI: 10.1016/j.asieco.2021.101307

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