Technology Spillovers of FDI and Technology Absorptive Capacity: the Case of China

Technology spillover of foreign direct investment inflow has always been highly concerned by scholars, while, the effect of spillover varies in provinces due to different technology absorptive capacity. This paper divides Chinese provinces into two groups according to their technology absorptive capacity and then explores whether the effect of technology spillover from FDI inflow is dependent on technology absorptive capacity. Through the analysis of data from 2003 to 2007, the study finds that the effect of spillover is larger in the group containing provinces with higher technology absorptive capacity, which indicates the importance of technology absorptive capacity in influencing the performance of the technology spillover.