External Technology Dependence and Manufacturing TFP : Evidence from China

It remains an open question whether the reduction of external technology dependence (ETD) on foreign countries can improve the total factor productivity (TFP) of China's manufacturing industry. This paper uses the data of China's manufacturing industry from 2000 to 2016, to study the impact of ETD on TFP and TFP's decomposition indicators. Empirical results show that a 1% decrease in ETD could induce a 1% increase in TFP. With regard to technology-intensive industries, one can find that the effect of ETD on TFP is stronger than that of other industries. Moreover, by employing human capital as the threshold variable, this study finds that the influence of ETD on TFP shows a significant threshold effect. Further, this paper uses the ratio of the number of patents granted to the number of patent applications as a proxy variable for innovation capacity, and verifies the moderating role of innovation capacity in the effect of ETD on China's manufacturing TFP