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

Chengqi Wang, Panagiotis Piperopoulos, Shihua Chen, Alan Au Kai Ming and Kendall Herbert

Journal of World Business, 2022, vol. 57, issue 3

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.

Keywords: internationalization; political ties; innovation; organizational learning; absorptive capacity; institutional fit (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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DOI: 10.1016/j.jwb.2021.101306

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