Foreign direct investment and multidimensional technological innovation: Empirical evidence from five East Asian economies (1996–2025)
Year: 2026
Type: article
Abstract: This study examines the long-term impact of foreign direct investment (FDI) on multidimensional technological innovation in five East Asian economies (China, Japan, Hong Kong, South Korea, and Singapore). To overcome the limitations of single innovation indicators, the research aims to reveal the empirical dynamics between foreign capital inflows and holistic innovation capacity over 30 years. Using a panel dataset covering the period 1996-2025, a composite Technological Innovation Index (TII) integrating technological creativity, technological infrastructure, and human capital components was constructed. The empirical analysis was performed using a random-effects model with robust standard errors to control for heteroskedasticity and unobserved unit effects, based on 144 observations. The econometric findings show that foreign direct investment has a statistically significant and negative effect on technological innovation. In contrast, both GDP per capita and labor force have strong, positive effects on the innovation index. Explanatory variables account for 74.4% of the variation in the innovation index. Empirical evidence contradicts the traditional assumption of technology transfer and suggests a potential crowding-out effect in which foreign capital suppresses local R&D efforts. The findings highlight that innovation is primarily driven by internal macroeconomic capacity and human capital rather than external investment.
Source: JOURNAL OF INTERNATIONAL STUDIES
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7204450194