| Summary: | Technological progress plays an important role in energy efficiency improvements. This paper considers two pathways that could accelerate technology development: technology introduction and technological innovation. The technology introduced through foreign direct investment (FDI) may enhance the host country’s independent innovation capability, minimize the risk of independent innovation and lower the cost. To that end, a two-stage analysis was conducted at the industrial level for the period 2000–2018 in Guangdong, China. The first stage included an estimation of total factor energy efficiency (TFEE) scores using the super-efficiency data envelopment analysis (DEA) methodology, while the second one included an exploration of how technological innovation and FDI are affecting energy efficiency by using system GMM regression in the whole sample of the manufacturing sector and sub-sample based on R&D intensity. The results indicate that energy use in most manufacturing industries is efficient and FDI participation induced spillovers from FDI have a significant positive impact on energy efficiency. Moreover, the analysis of the interaction term between FDI and technological innovation show that imitative innovation depends on the transfer technology strategy from foreign-funded enterprises to improve energy efficiency. These results have notable implications for energy use policy and sustainable economic development.
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