Foreign direct investment and export expansion: political connection and innovative performance

Abstract

Purpose

This study investigates two internationalization strategies, foreign direct investment (FDI) expansion and export expansion, and their effects on the innovation performance of Chinese multinational enterprises (MNEs). Additionally, it explores the moderating roles of both formal and informal political connections in the relationship between these internationalization strategies and innovation performance.

Design/methodology/approach

The hypotheses were tested using the Poisson panel model and data on 2,106 observations from 645 Chinese-listed firms between 2010 and 2017.

Findings

FDI expansion significantly enhances the innovation performance of Chinese MNEs compared to export expansion. Moreover, formal and informal political connections are found to have distinct moderating effects: formal political connections amplify the positive effect of FDI expansion on firm innovation, whereas informal political connections tend to weaken it.

Originality/value

This study contributes to the discourse on innovation and political connections, especially in the context of EMNEs. It enriches the theoretical understanding of internationalization strategies and innovation performance in EMEs, contrasting with the technology-utilization motives observed in MNEs from developed economies.

Citation

Yang, Y., Zhao, J. and Yang, Y.S. (2024), "Foreign direct investment and export expansion: political connection and innovative performance", Management Decision, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/MD-02-2024-0238