How OFDI Promotes High-Technology Multinationals’ Innovation: From the Perspective of a Cross-Border Business Model

Deping Xiong,Antonio Usai,Qian Chen,Xiang Wang,Giuseppe Cillo,Yilei Sun,Mengyuan Yang

doi:10.3390/su14031417

Abstract

High-quality innovation in cross-border business models is the focus of innovative development. However, some enterprises are blindly obsessed with focusing on the quantity of innovation, while they neglect the quality of innovation. As a result, the quantity of innovation in cross-border business models is not proportional to the quality, and cross-border business models need continuous improvement. High-quality innovation in cross-border business models is also related to outward foreign direct investment (OFDI) and knowledge absorptive capacity. The purpose of this study is to explore the relationship between OFDI and innovation quality in cross-border business models. This study proposes that knowledge absorptive capacity plays a mediating transmission role between OFDI and innovation quality. Based on panel data for 478 Chinese high-tech multinational enterprises in the period from 2014 to 2019, the paper uses moderated path analysis to construct a non-linear mediated transmission model of knowledge absorptive capacity in terms of the OFDI and innovation quality of high-tech enterprises. The results show that there is an inverted U-shaped relationship between OFDI and innovation quality. Knowledge absorptive capacity plays an inverted U-shaped mediating role in the transmission between OFDI and innovation quality. In a post hoc analysis, it was found that a low degree of OFDI has an inverted U-shaped relationship with innovation quality, and a high degree of OFDI negatively inhibits innovation quality. Therefore, Chinese high-tech enterprises operating cross-border must maintain an appropriate level of OFDI by improving the matching mechanism between OFDI and knowledge absorptive capacity, which is conducive to improving the innovation quality of multinational enterprises in host countries.

Highlights

The results show that outward foreign direct investment (OFDI) by high-tech enterprises has an inverted U-shaped relationship with knowledge absorptive capacity and innovation quality, respectively, and knowledge absorptive capacity plays a mediating role in the inverted U-shaped relationship between OFDI
The results show that the higher the knowledge absorptive capacity, the better the relationship between OFDI and innovation quality; With increase in OFDI, the quality of innovation of high-technology enterprises decreases, and the knowledge absorption capacity can moderate the relationship between OFDI and the quality of innovation
With the promotion of a cross-border business model, the proportion of investment by Chinese high-tech enterprises in neighboring countries has been on the rise year after year

Summary

Introduction

In 2017, the report of the 19th National Congress of the Communist Party of China pointed out that “innovation is the first driving force for development”. With the further development of innovation, Chinese enterprises have increased their outward foreign direct investment (OFDI), resulting in the development trend of large-scale “going out”. Cross-border commerce has become the mainstream of development for the innovation era. According to the National Bureau of Statistics, by the end of 2018, China’s outward foreign direct investment (OFDI) increased significantly to $120.5 billion, which was up 8.9 percent year on year. The results of outward foreign direct investment (OFDI) by Chinese. W.M.; Levinthal, D.A. Absorptive capacity: A new perspective on learning and innovation.

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