The Impact of Emerging Market Firms’ International Engagement on Product and Process Innovation

Abstract

Emerging market firms are taking on an increasingly important role in the global economy, both through their internationalization and contributions to global innovation. However, our understanding about how emerging market firms’ internationalization and innovative performance are related is quite limited. In this paper, we employ a unique survey of firms from ten emerging markets to study the relationship between the “international engagement” of these firms – measured through their exports, imports, competition with foreign firms, foreign joint ventures, and hiring of CEOs with international experience – and their product and process innovation performance. Our findings are broadly consistent with the idea that experiential and vicarious learning enables emerging market firms to access different types of knowledge through different types of international engagement, leading in turn to different types of innovative outcomes.