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Foreign direct investment spillovers and regional innovation in China: The spatial moderating role of absorptive capacity

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  • Yuxue Sheng
  • Xin Yang
  • Yao‐Yu Chih
  • Jun Zhang

Abstract

This study examines the relationship between foreign direct investment (FDI) and regional innovation relationship in Chinese cities from 2009 to 2018, considering the influence of local absorptive capacity (ABC). We employ spatial panel regression moderated models with an interaction term between ABC and FDI. Our findings reveal spatial correlation and heterogeneity in the impact of FDI on regional innovation. Across various ABC percentile points, both direct and indirect effects of FDI are significantly negative. However, incorporating the moderating variable ABC weakens the detrimental effect, and as ABC increases, the inhibitory effect dissipates, resulting in a positive impact on regional innovation.

Suggested Citation

  • Yuxue Sheng & Xin Yang & Yao‐Yu Chih & Jun Zhang, 2024. "Foreign direct investment spillovers and regional innovation in China: The spatial moderating role of absorptive capacity," Review of Development Economics, Wiley Blackwell, vol. 28(4), pages 1803-1837, November.
    • Handle: RePEc:bla:rdevec:v:28:y:2024:i:4:p:1803-1837
    DOI: 10.1111/rode.13122
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