Technology Spillovers Through Foreign Direct Investment

CERGE-EI Working Paper No. 39

38 Pages Posted: 17 Apr 1999

See all articles by Yuko Kinoshita

Yuko Kinoshita

International Monetary Fund (IMF); University of Michigan, William Davidson Institute; Centre for Economic Policy Research (CEPR)

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I study the effects of technology spillovers ("catch-up") and a firm's investment in skills(training) on the firm's productivity when FDI (foreign direct investment) is a carrier of new technology. Using 1992 firm-level survey data in China, I test the investment equation proposed by Parente and Prescott (JPE, April 1994). I find:

1.The catch-up effect and a firm's training both significantly raise a firm's TFP (total factor productivity) growth, just as Parente and Prescott hypothesized,

2.Chinese local firms are more likely to train skilled workers than foreign firms, which accelerated technology spillovers they received from foreign firms,

3.Foreign joint ventures did not significantly raise local firms' TFP growth,

4.Foreign-owned firms in China are unlikely to train local workers. Instead, they import intermediate inputs from their home countries.

JEL Classification: F21, F23

Suggested Citation

Kinoshita, Yuko, Technology Spillovers Through Foreign Direct Investment. CERGE-EI Working Paper No. 39, Available at SSRN: or

Yuko Kinoshita (Contact Author)

International Monetary Fund (IMF) ( email )

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University of Michigan, William Davidson Institute

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Centre for Economic Policy Research (CEPR)

United Kingdom

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