Second, we investigate whether the levels of technology gap affect the FDI spillovers. In
previous studies, Findlay (1978) and Wang and Blomstrom (1992) demonstrate that the greater
the technology gap between FDI and domestic firms, the higher opportunities there are for
domestic firms to achieve greater levels of efficiency via the imitation of foreign technologies
and innovations. However, the gap must not be too large. Our estimated results are consistent
with these findings. This result seems to contradict the theory that shrinking the technology gap
forces FDI firms to transfer more advanced technologies (Glass & Saggi, 1998).