Can the State be As a Vehicle of Technological Change?

The global integration of capital and technology generates a pressing debate on how technologically backward countries can benefit from FDI and catch up technologically. To better understand the mechanisms in the triangle of globalization-state-firm accounting for firm innovativeness, I test three types of the state’s roles – the state’s infrastructure-building, the state-firm partnership, and the state’s direct intervention in firm governance, combined with FDI spillovers and local firms’ absorptive capacity, in shaping local firms’ innovativeness in a national dataset of Chinese firms. I find that during Chinese firms’ initial technological take-off, the state helped enhance local firms’ indigenous innovativeness through its infrastructure-building and various partnerships with the firms. All three types of the state’s roles are found to positively modulate the firms’ absorptive capacities in affecting their innovativeness. Moreover, the state’s infrastructure-building and the firm’s state ownership weakened the negative role of some FDI-related effects in influencing firm innovativeness.