International reverse spillover effects on parent firms: Evidences from emerging-market MNEs in developed markets

Abstract

This study examines whether and to what extent emerging-market multinational enterprises (EM MNEs) use outward foreign direct investment (FDI) in a developed market to capture knowledge spillovers so as to improve their technological capabilities at home. We refer to this as a “reverse spillover” effect on parent firms, and develop the idea based on the knowledge-seeking motive for FDI by EM MNEs. Extending previous studies that have identified the knowledge-seeking motive and have also provided some evidence for its validity, our study focuses on the effects of such FDI on technological capabilities of EM MNEs at home. Using a panel dataset of 493 EM MNEs over the period 2000–2008, and controlling for possible endogeneity, we find evidence supporting the reverse spillover effect: EM MNEs that have subsidiaries in host developed markets richer in technological resources (measured by R&D investments and R&D employment) exhibit stronger technological capabilities at home. We discuss the implications of our study for research and practice related to the internationalization of EM MNEs.