Diversity in foreign direct investment and environmental innovation of emerging market firms: The effect of ownership-conveyed institutional logics

Abstract

Although foreign direct investment (FDI) allows emerging market firms (EMFs) to experience various institutions and learn to innovate, we know little about the] effects of exposure to diverse institutions on EMFs’ environmental innovation—a sustainable approach to pursuing economic growth. Incorporating the institutional logics perspective with the learning-from-diversity view, we investigate how an EMF’s environmental innovation benefits from diverse environmental regimes embedded in both its inward and outward FDI. We posit that EMFs become environmentally innovative by learning from diverse environmental regimes embedded in FDI activities. Also, this learning effect depends on the institutional logics dominant in these firms, demarcated by their ownership structure. Whereas the market capitalism logic strengthens EMFs’ learning-from-diversity effect, the state socialism logic does not. Analyses of a sample of 275 publicly listed Chinese firms between 2009 and 2018 support these theoretical arguments. Our findings contribute to the learning-from-diversity and institutional logics literature.