Internationalization, Product Innovation and the moderating Role of National Diversity in the Employment Base

Torben Schubert ()
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Torben Schubert: CIRCLE, Lund University, Postal: CIRCLE, Lund University, PO Box 117, SE-22100 Lund, Sweden

No 2021/3, Papers in Innovation Studies from Lund University, CIRCLE - Centre for Innovation Research

Abstract: The effects of establishing foreign-based subsidiaries on firm performance have long been debated, where empirical evidence hints at gains in terms of costs reductions, productivity or growth. Yet, little is known about the effects on innovative capabilities at the home base. Using a matched-employer-employee panel dataset of the Swedish Community Innovation Surveys (CIS) between 2008 and 2014, we estimate whether the employee share at subsidiaries abroad affects product innovation performance at home. Our results show the effects are positive on average. However, there is also evidence of detrimental effects of having employees abroad on innovation. In particular, for excessive shares of employees at foreign location, we provide evidence of an inverted u-shape between the probability to introduce product innovations and the share of foreign employment. Moreover, we show that the benefits of foreign employment are larger for firms with a more nationally diverse workforce at the home base. Our results are robust to a wide variety of robustness checks.

Keywords: Internationalization; Innovation; Diversity (search for similar items in EconPapers)
JEL-codes: M14 M16 O32 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2021-03-30
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eur, nep-ino, nep-int, nep-lab, nep-sbm, nep-tid and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lucirc:2021_003

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