Outward foreign direct investment, dynamic capabilities and radical innovation performance: empirical evidence from Chinese high-tech companies

Abstract

Purpose

This paper aims to conduct an analysis of the influence of both the breadth and depth of outward foreign direct investment (OFDI) undertaken by Chinese high-tech listed companies during the period spanning 2010–2019. The data pertaining to these companies was used as a research sample to analyze the effects of OFDI on radical innovation performance.

Design/methodology/approach

Hierarchical regression analysis was used to test the proposed models, using survey data collected from 442 high-tech companies in China.

Findings

The findings of this study indicate a curvilinear (i.e. U-shaped) relationship between the breadth/depth of OFDI and radical innovation performance. Additional analysis reveals that OFDI plays a role in facilitating innovation breakthroughs by enhancing the internal dynamic capabilities of companies. Moreover, it is observed that a well-established institutional environment in the host country of investment can positively moderate the relationship between OFDI breadth/depth and radical innovation performance.

Originality/value

This study proffers a significant contribution to the understanding of the crucial role played by OFDI from emerging economy companies in enhancing radical innovation performance. Moreover, it offers theoretical guidance for multinational companies aiming to foster innovation breakthroughs.

Citation

Zheng, X., Wang, F., Liu, S., Wang, H. and Zhang, D. (2024), "Outward foreign direct investment, dynamic capabilities and radical innovation performance: empirical evidence from Chinese high-tech companies", Chinese Management Studies, Vol. 18 No. 4, pp. 921-953. https://doi.org/10.1108/CMS-12-2022-0477