The Effects of Reverse Knowledge Spillover on China’s Sustainable Development: Sustainable Development Indicators Based on Institutional Quality

Xiaoxu Dong, Cheon Yu and Yun Seop Hwang
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Xiaoxu Dong: School of Business, Shandong University of Political Science and Law, Jinan 250014, China
Cheon Yu: Department of International Trade, Mokpo National University, Jeonnam 58544, Korea
Yun Seop Hwang: International Business & Trade, Kyung Hee University, Seoul 130-701, Korea

Sustainability, 2021, vol. 13, issue 4, 1-17

Abstract: This study investigates how reverse knowledge spillover (RKS) generated through outward foreign direct investment (OFDI) promotes sustainable development in an investment home country. Economic, social, and environmental dimensions are the pillars of sustainable development and their indicators are developed upon the concept of institutional quality. To this end, we use a balanced panel of 30 Chinese Mainland provinces from 2003 to 2016 and employ a simultaneous equation model to analyze the data in order to observe the direct and indirect effects of OFDI-induced RKS on sustainable development. The current study adopts several indicators to capture the economic, social, and environmental aspects of sustainable development. Additionally, we classify RKS into two types, given the investment destinations in terms of developed economies and emerging economies. On the one hand, our findings confirm that OFDI-induced RKS from developed economies facilitates domestic innovation but negatively affects progress on social and environmental development. On the other hand, OFDI-induced RKS from emerging economies is not conducive to domestic innovation, but it directly fosters sustainable development.

Keywords: outward foreign direct investment (OFDI); reverse knowledge spillover (RKS); innovation; sustainable development; institutional quality; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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