A Dynamic Model of Internationalization and Innovation in Emerging Market Enterprises: Knowledge Exploration, Transformation, and Exploitation.

Abstract

Drawing on organizational learning theory and taking an institutional perspective, this study investigates (1) the dynamic relationship between internationalization and innovation in emerging market enterprises (EMEs), and (2) how state ownership moderates the focal relationships. Using a panel dataset of listed Chinese firms from 2007 to 2018, we find that internationalization encourages innovation input in EMEs, which in turn transforms into more innovation output. Higher innovation output leads to further international commitment, creating a dynamic upward spiral of internationalization and innovation. Interestingly, state ownership positively moderates the innovation input-innovation output link but negatively moderates the relationship between innovation output and internationalization. Our paper enriches and refines our understanding of the dynamic relationship between internationalization and innovation in EMEs by integrating the knowledge exploration, transformation, and exploitation perspectives, with the institutional perspective of state ownership.