Unpacking the Relationship between Outward Direct Investment and Innovation Performance: Evidence from Chinese firms

Findings of a new paper co-authored by Professor Xiaolan Fu, published in World Development, suggests that conducting overseas direct investments (ODI) in developed countries serves as an effective channel for latecomer firms from emerging countries to overcome internal resource constraints, as well as to successfully leapfrog towards the technology frontier. 
This study investigates the impact of outward direct investment (ODI) by Chinese MNEs on innovation performance and the conditions under which such an impact is moderated, based on a sample of firms from Guangdong province, China. The empirical evidence suggests that undertaking ODI leads to an increase in the innovation performance of these Chinese firms. Meanwhile, the impact of ODI on innovation is contingent on firm characteristics such as in-house R&D, strategic orientation and international experiences as well as contextual factors associated with investment destinations and industry contexts. In addition, the authors also find that learning through ODI is a complex process during which a substitution relationship is revealed between ODI and in-house R&D among Chinese multinationals.

Fu, X., Hou, J. and Liu, X. (2017) 'Unpacking the relationship between outward direct investment and innovation performance: evidence from Chinese firms'World Development (102) pp. 111-123