Inward Foreign Direct Investment and Local Firm Innovation: The Moderating Role of Technological Capabilities

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Extant research on inward foreign direct investment (FDI) suggests that foreign entrants bring superior technology with them to host countries, thereby providing local firms the opportunity to learn and upgrade their technologies. However, foreign entrants also increase competition in the local market, potentially harming domestic firms. In this study, we extend existing work on inward FDI by investigating the moderating role of technological capabilities on the relationship between inward FDI and local firm innovation. Building upon firm capabilities arguments, we expect that domestic firms with existing technological capabilities are better positioned to stave off foreign competition and better able to learn from foreign entrants. However, we find, somewhat surprisingly, that local technological leaders apply for fewer patents and introduce fewer new products than do local technological laggards subsequent to foreign entry. These results imply that technological capabilities do not buffer domestic firms from the deleterious competition consequences associated with inward FDI.
Publisher
PALGRAVE MACMILLAN LTD
Issue Date
2019-07
Language
English
Article Type
Article
Citation

JOURNAL OF INTERNATIONAL BUSINESS STUDIES, v.50, no.5, pp.847 - 855

ISSN
0047-2506
DOI
10.1057/s41267-018-0177-1
URI
http://hdl.handle.net/10203/262787
Appears in Collection
MT-Journal Papers(저널논문)
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