Innovativeness and the relevance of political ties in Chinese MNEs

Abstract

In light of emerging-market multinationals’ substantial engagement in strategic asset-seeking internationalization, this study explores the effects of home-country political ties on innovativeness and reverse innovation transfer in Chinese multinationals. Based on a survey of 99 Chinese multinationals and their 177 subsidiaries, the results reveal that headquarters’ political ties hamper their innovativeness, an important factor in stimulating subsidiary innovativeness and, in turn, reverse innovation transfer in Chinese multinationals. This study contributes to the literature on subsidiary entrepreneurship and emerging-market multinationals and suggests that, without a certain level of innovativeness at headquarters, relying only on strategic asset-seeking overseas investment to achieve innovation catch-up is problematic. Our findings point also to the co-evolving nature of Chinese multinationals’ competence growth and catch-up process, and support the view on the liability of stateness suffered by Chinese multinationals.