Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
FDI and Domestic Enterprise Innovation in Western China ZHOU Bing Accounting School, Chongqing Technology and Business University, P.R.China [email protected] Abstract: With the development of the West Development, Foreign Direct Investment ( FDI ) tends to gradually increase in China. FDI will not only influence the flow capacity of interregional capital , but also will in turn lead to influence firms on the capacity of innovation with the flow of capital and technique among states or regions .Meanwhile ,many have concerns that FDI is of advantage to improve the incentive and capacity of innovation .Competing with FIEs in the same market , domestic enterprises could prevent themselves from falling behind technologically by increasing the indigenous capacity for technical innovations. The paper is an investigation of the hypothesis by compiling a panel data set in west areas covering the years of 2004-2008. The paper analyses the impact of FDI on the indigenous capacity for technical innovations. Our empirical tests reject the above hypothesis. To the contrary, we found FDI negative correlate to the self-innovation of western areas of China. Keywords: FDI, Innovation, Western China 1 Introduction On relationship between FDI and innovation, many domestic scholars and abroad have been researching from different points of view. MacDougall (1960) firstly proposed FDI affect spillover of tech on host nation by using comparative static analysis. Haksar’s (1995) test shown the spillover effect FDI made is far lower than that of local R&D. Tim Craig (1997) argued FDI aiming at gaining profit must have ability of tech diffusion. Lucio Biggiero (2002) from the angle of biography and medicine suggested the most fundamental rule of FDI is to produce “spillover effect”. Alejendo Ciruelos & Miao Wang (2005) used data from 57 countries covering 1988-2001and found FDI played the role of being channel for tech transferring among countries as trade did and the effect varies according to different places. By contrast, some researches to developing countries show the opposite result. Kathak (1989) use method of production function and found the effect of tech spillover only exist in high-tech industry. Blomstrom (1989), Haddad and Harrison (1993), Goldan (1994) Haksar (1996) developed the same result by testing Mexico, India and Morocco. In China, with great inflow of foreign capital, the effect it made has been noticed broadly by theoreticians. Kun-rong Shen (1999) took cross section analysis on the relationship between all-element productivity and aggregate FDI of 29 provinces(cities) in 1996, and found the share of FDI in GDP increased by 1% and production 0.37% accordingly. Shen and Geng (2001) concluded plentiful inflow of FDI not only alleviate the capital scarce of host nation among developing countries and accelerated pace of internationalization ,industrialization and marketability of national economy, and improved efficiency of tech and level of organization. Hong-ling Wang, Dao-kui Lee, Jun-xin Feng (2006), after taking regression analysis of the relationship between FDI and self-innovation covering 37 industries, found FDI could promote innovation of domestic firms. But some scholars holding opposite opinion. Hui juan Cheng (2002) used multi-variable OLS and found that the inflow of FDI to the increase of developed countries is more obvious than that of developing countries. Tao-tao Chen (2003) believed spillover will happen only when there is a little disparity between domestic and abroad companies. Hai-yang Zhang (2005) took analysis of absorbing capacity of R&D of China industrial department using panel data, and the result is that domestic corporations didn’t absorb the advanced technique, instead it produced obvious inverted tech-diffusion in high-tech industry. Besides that above, the tech improvement is mainly from self-innovation and still fall behind abroad peers. Min-Leng (2005) suggested even if the inflow of FDI led to somewhat improvement of host nation, it didn’t mean the tech improvement of local enterprises and national companies. Nowadays, majority of scholars believed that FDI could promote R&D capacity of China companies. Others thought otherwise. Because of the unbalance of China economy, it can be seen that the effect of FDI , - 152 varied according to areas. Up to now, there has been no systematic research on whether or not FDI put positive impact on innovation of western domestic enterprise. In the following analysis, we’ll use panel data set of eleven provinces in western China from year 2004 to 2008 and discussed the relationship between FDI and innovation. 2 Model In order to grasp the foreign direct investment (FDI) effect on innovation of domestic-funded enterprises in the western region from individual and overall, we use entity fixed effects regression model and time and entity fixed effects regression model to analysis the relationship between western FDI and the innovation of western enterprises with quantitative analysis. 1. Entity fixed effects regression model: DEIit =αi +β1× FDIit+β2×DESit+εit, 2. Time and entity fixed effects regression model: DEIit =αi +γt +β1× FDIit+β2×DESit+εit, The variable subscript i indicate different province, regions and municipalities, t indicate different years.αi is a random variable, it indicate that different provinces have i different drift, and the change of which have something to do with foreign direct investment FDI and domestic enterprise sale revenue; DEI means The domestic enterprises’ ability of innovation; DES means domestic enterprise sale revenue ;γt is a random variable, which indicates T sections have T different drift, and change of have something to do with the foreign direct investment FDI and domestic enterprise sale revenue,εit is items. The β1 above is the most important parameters ,if the β1 is positive ,it means that the increase of foreign direct investment FDI improve the capability of innovation of domestic enterprises; If b1 is negative, it means that the increase in foreign direct investment FDI inhibit our domestic enterprises’ ability to innovate. 3 Samples and Data The first step of statisticsing analytical is the right selection of sample, we should follow with the comprehensive, system, science principle in selecting examinations and collecting data. For the sake of better analytical western FDI with inside property the enterprise innovation relation, we select by examinations of the data is region in the west from year 2004 to 2008. It takes province as unit, including Xinjiang, Guizhou, Guangxi Sichuan and so on. In order to statisticsing caliber and other region existence difference Tibet, the data can't acquire, so do not bring into range of research. All data samples all come from above-mentioned eleven provinces. Supporting the enterprise innovation ability can from technology activity devotion and obtain of innovation result this both side to measure, From devotion, including: The people R & D scientist and engineer count, the devotion of the R & D budget expenditure of the science, technology movable financial power and GDP comparison, the R & D budget expenditure have product sales income specific weight. From produced, including: Ten thousand employment invent patent authorization quantity, new the product sales income have product sales income specific weight, high and new technique industry increment value rate. The index sign which concretely changes a quantity selection changes quantity and it explains to see table 1. variable RS JF ZL signification Table 1: Index and it explains variable signification The myriad people R & D scientist and engineer count the R & D budget expenditure of the science and technology movable financial power and GDP comparison Ten thousand employment invent TR the devotion, the R & D budget expenditure of the science JFP the R & D budget expenditure have product sales income specific weight XPP new the product sales income have product sales 153 patent authorization quantity GXP income specific weight high and new technique industry increment value rate XR inside property enterprise sales income 4 The Result and Analysis: After doing Levin, lin chu unit root test to panel data, we obtain the model result which from FDI to input, output and difference of different province of innovation. Look at the table 2, table 3, table 4; the goodness of fit equation is more than 80%, which indicate a strong ability to explain. Most of the D-W near 2, indicating that there is no obvious correlation between the explanatory variable, and another, all the statistic passed the test, which shows a relatively strong reliability of the model. According to the influence of the input of innovation of western enterprises (from Table2), there is no significant improve in ability of innovation of domestic enterprises , instead, inhibition of the domestic enterprises to improve the capability of innovation. If the percentage point of foreign direct investment (FDI) increase one percentage, the number of scientists and engineers in R&D will decrease from 0.025%, the funds of technology will decrease from 0.022%, the expenditure of R&D and ratio of GDP will drop from 0.02%, and R&D expenses accounted for the proportion of revenue of product sales will fall from 0.003% in the same time. According to this, the entrance of foreign capital enterprises will reduce the investment of R&D of enterprises in the western parts, and influence the growth of capability of innovation, which in reality have got progress than ever before, it just is due to the growing income of sales. The growth of sales of domestic enterprises has improved the capacity of R&D. Table 2: The FDI’s influence on the input of innovation of western enterprises ln(RS(-1)) ln(TR) ln(JF) ln(JFP) ln(FDI ) ln(XR) -0.025*** -0.017** -0.022*** -0.016*** -0.020** -0.026** -0.003*** -0.021** 0.21* -0.74** 1.05*** 0.76* 0.55*** 0.87*** -0.006* 0.323* model Entity fixed effects regression model (model 1 Time and entity fixed effects regression model model2 0.99 Entity fixed effects regression model (model 1 Time and entity fixed effects regression model model2 0.95 Entity fixed effects regression model (model 1 Time and entity fixed effects regression model model2 0.91 Entity fixed effects regression model (model 1 Time and entity fixed effects regression model model2 0.91 ) R2 0.98 ( ) ) 0.95 ( ) ) 0.95 ( ) ) 0.90 ( ) F-statis 200.65 198.45 57.56 48.79 57.98 47.21 65.47 65.24 tic Note: * Indicates a significant 10% level; ** indicates a significant 10% level; *** indicates 1% significant level; Ln means take logarithm. According to the influence of the output of innovation of western enterprises(from Table3), If the percentage point of foreign direct investment (FDI) increase one percentage, the patents volume will fall 0.016%, the revenue of new product sales will increase from 0.07%, and Add-Value Rate of high-tech industries will drop 0.004 units. Except the revenue of new product sales , the other indicates are also inhibitory to the output of western enterprises’ innovation. Meanwhile, if the percentage point of domestic enterprises’ sales increase one, the volume of patents will increase 0.43 percentage point, the revenue of new product sales will rise0.67%, and Add-Value Rate of high-tech industries will increase 0.32. Then, this will be the same with the above analysis, that the increase in FDI will reduce the ability of innovation of western enterprises, and the ability of innovation of domestic enterprises will be inhibited by FDI. 154 Table 3: The FDI’s influence on the output of innovation of western enterprises ln(ZL) ln(XXP(-1)) GXP ln(FD I) ln(XR ) medol R2 -0.016** -0.09* 0.07*** 0.011** -0.004* -0.003*** 0.43*** 0.21*** 0.67*** 0.73** 0.32** 0.22* Entity fixed effects regression model (model 1 0.91 Time and entity fixed effects regression model model2 0.90 Entity fixed effects regression model (model 1 0.91 Time and entity fixed effects regression model model2 0.90 Entity fixed effects regression model (model 1 0.87 Time and entity fixed effects regression model model2 0.89 ) ( ) ) ( ) ) ( ) F-stati 20.8 98.45 37.0 45.30 46.21 44.38 stic Note: * Indicates a significant 10% level; ** indicates a significant 10% level; *** indicates 1% significant level; Ln means take logarithm . 5 Conclusion Actually concerning that innovation ability from the foreign direct investment (FDI) to the western domestic enterprise is in the promoter action or in the inhibitory action, this paper through the research, supports "the suppression theory": Namely that increase of the foreign direct investment (FDI) has suppressed the innovation of the western area domestic enterprise. Analyzing through above, we discovered that regardless of infection of investment of domestic capital enterprise to innovation or output of the domestic capital enterprise to innovation, the foreign capital’s activity all does not have the promoter action to it, but is the inhibitory action. But the investigation discovered that the enhancement of the domestic capital enterprise's sales income is advantageous to the enterprise's innovation. This indicated that the western area innovation mainly depends upon own scale size. Therefore, according to the western domestic capital enterprise’s innovation, that the foreign direct investment’s technology is more advanced is by no means better. On introducing foreign direct investment, it must be act according to circumstances, and does what one can. Author’s brief: Bing Zhou: Male, Researcher of Research Center of The Economy of The Upper Researches of The Yangtze River of Chongqing Technology and Business University; Researcher of Industry Academe of Chongqing Technology and Business University ;Vice-Dean of accounting school; Main Research Direction for Applied Economics; Email:[email protected]. References [1]. Zhao Guoqing. Absorptive capacity study of international direct investment in western China. China Social Sciences Publishing House, 2004: 133 140 (in Chinese) [2]. J.M Wooldridge. Introduction of modern econometrics perspective, People's University of China Publishing House, Beijing, 2003:107 152 (in Chinese) [3]. Piao Shangtian between. Foreign direct investment and technology transfer Review. Economics dynamic, 2004, 5:102 105 (in Chinese) [4]. Zhang Gui, Su Zhijiong. Technological innovation-driven analysis of the new development concept .Productivity, 2005, 1 : 190 192 (in Chinese) [5]. Wang Hongling, Li Daokui, Feng Junxin. FDI and our own research: Based on the experience of industry research data. Economic studies. 2006, 2 : 44 56 (in Chinese) [6]. Zhang Haiyang. R & D has two sides, China's foreign activities and to increase industrial productivity. Research, 2005, 5 :107 117 (in Chinese) ~ ~ ~ ~ ~ ~ 155