Technology Gap, Reverse Technology Spillover and Domestic Innovation Performance in Outward Foreign Direct Investment: Evidence from China

23 Pages Posted: 22 Mar 2019

See all articles by Jin Hong

Jin Hong

University of Science and Technology of China (USTC) - School of Management

Chongyang Zhou

University of Science & Technology of China; City University of Hong Kong (CityUHK), Department of Economics & Finance

Yanrui Wu

University of Western Australia

Ruicheng Wang

Nanjing University of Science and Technology

Dora Marinova

Curtin University

Date Written: March–April 2019

Abstract

This research adds to the literature studying the effects of outward foreign direct investment (OFDI) on domestic innovation performance and the moderating effect of a technology gap between host and home countries. New definitions of observed technology gap and expected technology gap are proposed. An observed technology gap captures the existing differences in technology level between establishments, regions or countries. An expected technology gap is an indication of the effort of imitating and learning from technology leaders. The corresponding measures and effects of observed and expected technology gaps on OFDI‐induced reverse technology spillover are analyzed. OFDI in developed countries promotes innovation performance. However, OFDI in emerging markets hampers innovation performance. It is also found that regions with a wider observed technology gap and a narrower expected technology gap can benefit more from OFDI.

Keywords: innovation performance, outward foreign direct investment, reverse technology spillover, technology gap

JEL Classification: O21, O30, O32, O33

Suggested Citation

Hong, Jin and Zhou, Chongyang and Wu, Yanrui and Wang, Ruicheng and Marinova, Dora, Technology Gap, Reverse Technology Spillover and Domestic Innovation Performance in Outward Foreign Direct Investment: Evidence from China (March–April 2019). China & World Economy, Vol. 27, Issue 2, pp. 1-23, 2019, Available at SSRN: https://ssrn.com/abstract=3355909 or http://dx.doi.org/10.1111/cwe.12272

Jin Hong (Contact Author)

University of Science and Technology of China (USTC) - School of Management ( email )

China

Chongyang Zhou

University of Science & Technology of China ( email )

Hefei, Anhui
China

City University of Hong Kong (CityUHK), Department of Economics & Finance ( email )

Hong Kong

Yanrui Wu

University of Western Australia ( email )

Department of Economics
Nedlands WA 6907
Australia
+61 8 9380 3964 (Phone)
+61 8 9380 1016 (Fax)

Ruicheng Wang

Nanjing University of Science and Technology ( email )

No.219, Ningliu Road
Nanjing, 210094
China

Dora Marinova

Curtin University ( email )

Kent Street
Bentley
Perth, WA WA 6102
Australia

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