The impact of FDI spillover effects on total factor productivity in the Chinese electronic industry: a panel data analysis

This paper empirically investigates the impact of inward foreign direct investment (FDI) on total factor productivity (TFP) growth in a developing country, China. Utilising an endogenous growth theoretic framework, we estimate a model using 1328 firm-level data and spanning the period 2003-2008. We find that the productivity gap constrains the impact of FDI on TFP, while foreign equity participation enhances technological transfer from foreign partners thus resulting in increased TFP in the Chinese electronic industry (CEI). Our findings demonstrate the need for greater investment in the human capital skill base, adopting flexible labour regulatory policies and encouraging investment in R&D as it enhances TFP in the CEI.