Foreign versus Indigenous Innovation and Energy Intensity: Further Research across Chinese Regions

Abstract

The aim of this work is to analyze the role played by both foreign and indigenous innovation on energy intensity as well as the possible interactions between them across 30 Chinese regions. In addition, we disaggregate non-state investment into the different types of corporate ownership that operate in China, controlling for other relevant factors such as energy price and the share of industry. We examine not only total energy intensity, but also coal, crude oil, natural gas, and electricity in order to provide a complete picture of the energy sector in this country. The empirical model is estimated by panel-corrected standard errors over the period 2006-2010. Our findings indicate that the process of technological change through both foreign and indigenous innovation has been an important mechanism to improve the use of energy resources. However, the interaction between foreign and indigenous innovations is modest. We also observe that non-state investment plays a key role in reducing energy intensity, although both the specific type of ownership and the source of energy also matter. A closer look at regional differences among the transmission grids in China reveals the importance of accounting for the structure of investment and its geographical location.