Outward FDI, location choices and innovation performance of emerging market enterprises

• Published in: Research policy Vol. 47; no. 1; pp. 232 - 240
• Main Authors: Piperopoulos, Panagiotis, Wu, Jie, Wang, Chengqi
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01-02-2018
• Subjects: China; Emerging market enterprises; Geographic location; Innovation; Organizational learning; Outward foreign direct investment; Subsidiaries; Innovation; Emerging market enterprises; Outward foreign direct investment; Subsidiaries; China; Organizational learning; Geographic location
• ISSN: 0048-7333; 1873-7625
• DOI: 10.1016/j.respol.2017.11.001

•Our analyses are based on 96 publicly listed high-tech Chinese enterprises over the 2001–2012 period.•OFDI acts as a vehicle for the organization learning for EMEs.•EMEs’ OFDI positively affects innovation performance.•The innovation-enhancing effect of OFDI is higher when it is undertaken in developed host countries.
Although prior research conceptualizes how knowledge-seeking motivates the internationalization of emerging-market enterprises (EMEs), whether outward foreign direct investment (OFDI) indeed leads to enhanced innovation performance has received limited attention. We address this subject by conceptualizing how Chinese EMEs’ OFDI enhances their subsidiaries’ organizational learning and innovation performance and whether geographic location choices influence this relationship. Our panel data analysis of Chinese EMEs shows that OFDI has a positive effect on innovation performance of Chinese EMEs’ subsidiaries and that this effect is stronger when the OFDI is directed towards developed rather than emerging countries. These findings advance the notion that EMEs can use OFDI as a strategy to globalize R&D and enhance their innovation performance and demonstrate that certain established assumptions regarding organizational learning are not valid for EMEs.