Outward FDI and Innovation Performance of Chinese Firms: Why Can Home-Grown Political Ties Be A Liability?

CQ Wang; P Piperopoulos; SH Chen; Alan Au; K Herbert

doi:10.1016/j.jwb.2021.101306

Outward FDI and Innovation Performance of Chinese Firms: Why Can Home-Grown Political Ties Be A Liability?

CQ Wang, P Piperopoulos, SH Chen, Alan Au, K Herbert

Lee Shau Kee School of Business and Administration

Research output: Contribution to journal › Article › peer-review

29 Citations (Scopus)

Abstract

We explain how home-grown political ties of Chinese firms negatively influence the effect of outward foreign direct investment (OFDI) on the innovation performance of their parent firms. Our results show that these ties can turn into a liability in the host countries (particularly developed ones) due to their misfit with the local institutional environment, hampering the parent firms’ innovation performance from OFDI. We also clarify how absorptive capacity of the parent firm mediates the relationship between OFDI and innovation performance. Our study furthers understanding of the link between internationalization and innovation performance and the ‘dark side’ of political ties.

Original language	English
Article number	101306
Number of pages	16
Journal	Journal of World Business
Volume	57
Issue number	3
DOIs	https://doi.org/10.1016/j.jwb.2021.101306
Publication status	Published - Apr 2022

Keywords

Absorptive capacity
Innovation
Institutional fit
Internationalization
Organizational learning
Political ties

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jwb.2021.101306

Cite this

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title = "Outward FDI and Innovation Performance of Chinese Firms: Why Can Home-Grown Political Ties Be A Liability?",

abstract = "We explain how home-grown political ties of Chinese firms negatively influence the effect of outward foreign direct investment (OFDI) on the innovation performance of their parent firms. Our results show that these ties can turn into a liability in the host countries (particularly developed ones) due to their misfit with the local institutional environment, hampering the parent firms{\textquoteright} innovation performance from OFDI. We also clarify how absorptive capacity of the parent firm mediates the relationship between OFDI and innovation performance. Our study furthers understanding of the link between internationalization and innovation performance and the {\textquoteleft}dark side{\textquoteright} of political ties.",

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AB - We explain how home-grown political ties of Chinese firms negatively influence the effect of outward foreign direct investment (OFDI) on the innovation performance of their parent firms. Our results show that these ties can turn into a liability in the host countries (particularly developed ones) due to their misfit with the local institutional environment, hampering the parent firms’ innovation performance from OFDI. We also clarify how absorptive capacity of the parent firm mediates the relationship between OFDI and innovation performance. Our study furthers understanding of the link between internationalization and innovation performance and the ‘dark side’ of political ties.

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KW - Institutional fit

KW - Internationalization

KW - Organizational learning

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Outward FDI and Innovation Performance of Chinese Firms: Why Can Home-Grown Political Ties Be A Liability?

Abstract

Keywords

UN SDGs

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