Does Energy Efficiency Benefit from Foreign Direct Investment Technology Spillovers? Evidence from the Manufacturing Sector in Guangdong, China

Abstract

Given that energy is a significant input factor for modern economic growth, which has also brought the most severe negative externalities damage to the environment, improving energy efficiency is considered critical globally. As a large energy producer and consumer, China faces challenges from both the economy and the environment. This study used the generalized method of moments estimation techniques to examine the impact of foreign direct investment (FDI) technology spillovers on energy efficiency in a sample of manufacturing industries. A super-efficient data envelopment measure of energy efficiency is examined. The novelty of this study is that it analyzes both the quantitative and qualitative values of various spillover effects at the industry level. Using a panel data set on 26 manufacturing industries in Guangdong Province of China covering the period 2000-2018, the empirical results show a positive and statistically significant relationship between FDI competitive effects and energy efficiency. In contrast, this relationship is in the opposite position when demonstration effects of FDI technology spillovers occur. The results also show these effects have more impact to the low or middle energy consumption industries. The study provides a reference for the formulation of the FDI strategy and energy policy in the manufacturing sector.