FDI and independent ennovation: empirical analysis based on panel data of western regions in China

With the development of Western Regions, 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 independent innovation with the flow of capital and technique among states or regions. Meanwhile, many people have concerns that FDI is of advantage to improve the incentive and capacity of independent 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 2001-2005. 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 regions of China.