Abstract: With the increasing capital flow in the world, many countries, especially developing counties, tend to introduce foreign direct investments (FDI) for the purpose of utilizing technology spillovers from multinational enterprises to local enterprises. Up to now, a few papers showed that the vertical linkages can supply more channels for technology spillovers than the level linkages. The technology spillovers from FDI between industries, especially the technology spillovers from the backward linkages, should be further studied. By calculating the ratio of foreign investment and industrial output, we constructed the “backward linkage” variable in an innovated way according to the definition of backward linkage. We established empirical model and tested the existence of technology spillovers effects of backward linkages from multinational enterprises in China. From the regression of a panel data from 39 industrial sectors with a time span of consecutive six years (2007-2012), the results indicate that multinational enterprises in China have a significant positive spillover effect to local enterprises through backward linkages. And the technology spillover affected on local enterprises through backward linkages play an important role far more than that of capital intensity.
Keywords: Backward linkages, technology spillovers, multinational enterprises, China, FDI