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Journal of International Business Studies

, Volume 50, Issue 5, pp 847–855 | Cite as

Inward foreign direct investment and local firm innovation: The moderating role of technological capabilities

  • Byungchae JinEmail author
  • Francisco García
  • Robert Salomon
Research Note

Abstract

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.

Keywords

foreign direct investment inward FDI firm capabilities knowledge transfer technological innovation 

Résumé

La recherche existante sur les investissements directs étrangers (IDE) suggère que les capitaux entrants étrangers apportent avec eux des technologies supérieures aux pays hôtes, offrant ainsi aux entreprises locales la possibilité d’apprendre et d’améliorer leurs technologies. Cependant, les investissements entrants étrangers augmentent également la concurrence sur le marché local, ce qui peut potentiellement nuire aux entreprises domestiques. Dans cette étude, nous prolongeons les travaux existants sur les IDE entrants en examinant le rôle modérateur des capacités technologiques sur la relation entre les IDE entrants et l’innovation des entreprises locales. En nous appuyant sur les débats liés aux capacités des firmes, nous nous attendions à ce que les entreprises domestiques ayant des capacités technologiques existantes soient mieux placées pour éviter la concurrence étrangère et soient mieux à même d’apprendre des investissements entrants étrangers. Toutefois, nous constatons, de manière quelque peu surprenante, que les leaders technologiques locaux demandent moins de brevets et introduisent moins de nouveaux produits que les retardataires technologiques locaux après l’entrée des investisseurs étrangers. Ces résultats impliquent que les capacités technologiques ne protègent pas les entreprises domestiques contre les conséquences néfastes de la concurrence liées aux IDE entrants.

Resumen

La investigación existente sobre la inversión extranjera directa (IED) entrante sugiere que los participantes extranjeros traen consigo tecnología superior a los países de acogida, lo que les brinda a las empresas locales la oportunidad de aprender y actualizar sus tecnologías. Sin embargo, los participantes extranjeros también aumentan la competencia en el mercado local, lo que puede potencialmente dañar a las empresas nacionales. En este estudio, ampliamos el trabajo existente sobre la IED entrante mediante la investigación del papel moderador de las capacidades tecnológicas en la relación entre la IED entrante y la innovación de las empresas locales. Sobre la base de argumentos de las capacidades empresariales, esperamos que las empresas nacionales con capacidades tecnológicas existentes estén mejor posicionadas para evitar la competencia extranjera y que puedan aprender mejor de los entrantes extranjeros. Sin embargo, encontramos, algo sorprendentemente, que los líderes tecnológicos locales solicitan menos patentes e introducen menos productos nuevos que los rezagados tecnológicos locales con posterioridad a la entrada de competidores extranjeros. Estos resultados implican que las capacidades tecnológicas no protegen a las empresas nacionales de las consecuencias negativas de la competencia asociadas con la entrada de IED.

Resumo

Pesquisas existentes sobre investimentos estrangeiros diretos (FDI) para dentro sugerem que entrantes estrangeiros levam tecnologia superior para os países anfitriões, portanto proporcionando às empresas locais a oportunidade de aprender e atualizar suas tecnologias. No entanto, entrantes estrangeiros também aumentam a concorrência no mercado local, potencialmente prejudicando empresas domésticas. Neste estudo, estendemos o trabalho existente sobre o FDI para dentro investigando o papel moderador de capacidades tecnológicas na relação entre FDI para dentro e inovação da empresa local. Baseando-se em argumentos sobre a capacidade firma, esperamos que empresas locais com capacidades tecnológicas existentes estejam melhor posicionadas para evitar a concorrência estrangeira e mais capazes de aprender com entrantes estrangeiros. No entanto, descobrimos de certa surpreendente, que líderes tecnológicos locais solicitam menos patentes e introduzem menos produtos novos do que os retardatários tecnológicos locais subsequentes à entrada no estrangeiro. Estes resultados implicam que capacidades tecnológicas não protegem empresas domésticas das consequências deletérias da concorrência associadas ao FDI para dentro.

摘要

对外国直接投资(FDI)的现有研究表明, 外国进入者将优越的技术带到东道国, 从而为当地公司提供学习和更新其技术的机会。然而, 外国进入者也增加当地市场的竞争, 可能会对国内公司有害。在本研究中, 我们通过调查技术能力对内向外国直接投资与当地企业创新之间关系的调节作用拓展了对FDI的现有工作。基于公司能力论点, 我们期望具有现有技术能力的国内公司能更好地避开外国竞争,同时更好地向外国进入者学习。然而, 我们有些令人惊讶的发现是, 外国进入后本地技术领导者申请专利和推出新产品的数量少于本地技术落后者。这些结果意味着技术能力不会使国内企业免受与内向FDI相关的有害竞争后果的影响。

Notes

Acknowledgements

We are grateful to Editor Arjen van Witteloostuijn and anonymous reviewers for their guidance and helpful comments. We would also like to thank Wilbur Chung and John Cantwell for their helpful comments on earlier versions of this manuscript. Francisco García gratefully acknowledges financial support from the Spanish Ministerio de Economía y Competitividad (ECO2015-68257-R).

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Copyright information

© Academy of International Business 2018

Authors and Affiliations

  • Byungchae Jin
    • 1
    Email author
  • Francisco García
    • 2
  • Robert Salomon
    • 3
  1. 1.KAIST College of BusinessKorea Advanced Institute of Science and TechnologySeoulSouth Korea
  2. 2.Facultad de Economía y Empresa, Universidad de OviedoOviedo (Asturias)Spain
  3. 3.NYU Stern School of BusinessNew YorkUSA

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