China&apos;s Outward Foreign Direct Investment and Technology Innovation: Based on the Perspective of Factor Market Distortion

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Journal of Central University of Finance & Economics ›› 2018, Vol. 0 ›› Issue (8) : 99-112.

China's Outward Foreign Direct Investment and Technology Innovation: Based on the Perspective of Factor Market Distortion

JIANG Neng-peng, HE Pei, CHEN Jin-zhi

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Abstract

Using the number of patent applications as the innovation agent variable and the matched province-level panel data spanning the period from 2004 to 2016, this paper examines the effect of OFDI on technology innovation and tries to answer the question how China's market distortion of labor and capital affects the influence of OFDI on technology innovation. The study found that: China's OFDI has obviously promoted technological innovation and the promotion effect is prominently reflected in the original research field. Based on the research perspective of factor market distortion, the author uses transcendental logarithmic production function and ridge regression method to measure the degree of distortion of capital and labor factor market. The results show that the price of Chinese capital and labor factor is overestimated and the two factor markets also distort. Although the degree of the two factor market distortion is different, the output and quality effects of OFDI technology innovation are suppressed. The above conclusions are still robust after using the system GMM method to solve the problem of over identification and endogeneity of instrumental variables. The author suggests: create a fair financing environment, reduce capital factor misallocation and efficiency loss caused by the biased policy, guide enterprises to increase investment for original research in the field of core technology; deepen the structural reform of labor supply side, pay more attention to the long-term impact of human capital accumulation on the progress of OFDI promoting technology; further exploring the research on the mechanism of factor market distortion restraining the technological innovation effect of OFDI should be the direction for further research in the future.

Key words

OFDI / Technology innovation / Factor market / Distortion / Patent

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JIANG Neng-peng, HE Pei, CHEN Jin-zhi. China's Outward Foreign Direct Investment and Technology Innovation: Based on the Perspective of Factor Market Distortion[J]. Journal of Central University of Finance & Economics, 2018, 0(8): 99-112

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