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The Influence of FDI on Domestic Innovation: An Investigation Using Structural Breaks

Author

Listed:
  • Mingbo Zheng
  • Gen-Fu Feng
  • Jun Wen
  • Chun-Ping Chang

Abstract

This paper investigates the influence of foreign direct investment on innovation by em-ploying the panel cointegration method incorporating multiple structural breaks and a dynamic common correlated estimation for 34 countries over the period 1991-2016. Our findings indicate that the series of innovation and foreign direct investment are stationary after considering the potential structural breaks and that the external shock is mainly from country-specific shocks. Our results also suggest that a long-run co-integrated relationship exists with one break between foreign direct investment and innovation. Furthermore, the estimation based on the dynamic common correlated estimation shows that foreign direct investment has a long-run significant positive influence on technological innovation. Our findings shed light on the importance of accounting for structural breaks when discussing the relationship between foreign direct investment and technological innovation.

Suggested Citation

  • Mingbo Zheng & Gen-Fu Feng & Jun Wen & Chun-Ping Chang, 2020. "The Influence of FDI on Domestic Innovation: An Investigation Using Structural Breaks," Prague Economic Papers, Prague University of Economics and Business, vol. 2020(4), pages 403-423.
    • Handle: RePEc:prg:jnlpep:v:2020:y:2020:i:4:id:739:p:403-423
    DOI: 10.18267/j.pep.739
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    Citations

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    Cited by:

    1. Yin, Hua-Tang & Wen, Jun & Chang, Chun-Ping, 2022. "Science-technology intermediary and innovation in China: Evidence from State Administration for Market Regulation, 2000–2019," Technology in Society, Elsevier, vol. 68(C).
    2. Wen, Jun & Zhao, Xin-Xin & Fu, Qiang & Chang, Chun-Ping, 2023. "The impact of extreme weather events on green innovation: Which ones bring to the most harm?," Technological Forecasting and Social Change, Elsevier, vol. 188(C).
    3. Chen, Yin-E & Li, Chunyan & Chang, Chun-Ping & Zheng, Mingbo, 2021. "Identifying the influence of natural disasters on technological innovation," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 22-36.
    4. Zhao, Wei & Liu, Yishu & Huang, Lihua, 2022. "Estimating environmental Kuznets Curve in the presence of eco-innovation and solar energy: An analysis of G-7 economies," Renewable Energy, Elsevier, vol. 189(C), pages 304-314.
    5. Yang, Qi-Cheng & Chen, Xia & Chang, Chun-Ping & Chen, Di & Hao, Yu, 2021. "What is the relationship between government response and COVID-19 pandemics? Global evidence of 118 countries," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 98-107.
    6. Shuangyan Li & Anum Shahzadi & Mingbo Zheng & Chun-Ping Chang, 2022. "The impacts of executives’ political connections on interactions between firm’s mergers, acquisitions, and performance," Economic Change and Restructuring, Springer, vol. 55(2), pages 653-679, May.
    7. Yang, Qi-Cheng & Zheng, Mingbo & Chang, Chun-Ping, 2022. "Energy policy and green innovation: A quantile investigation into renewable energy," Renewable Energy, Elsevier, vol. 189(C), pages 1166-1175.

    More about this item

    Keywords

    Innovation; patent; trademark; FDI; structural breaks; cointegration;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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