An Analysis on Technology Spillover Effect of Foreign Direct Investment and Its Countermeasures

Yiying Zhu


Due to the reform and opening-up policy, China has become one of the most attractive recipients of FDI,
attributing a lot to the economic boom in the last three decades. The inflow of foreign investment has not only
brought a package of capital, management expertise and production technology but also significantly spurred
industrial development through technology spillover. Such a diffusion effect can impose beneficial influence on
domestic economy through various channels: forward and backward linkages, demonstration or imitation effect
and mobility of human resources. But since the occurrence of technology spillover is also conditional and
restricted by many factors, it is meaningful to understand what these constraints are, and propose correspondent
approaches to facilitate better utilization of FDI and technology spillover effect, both for domestic enterprises
and macro-economic operations.

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