Yoo Jung Ha

Foreign Direct Investment (FDI) and Indigenous Firms’ Innovation: The Moderating Effect of Environmental Dynamism

Strategy, international business and economics literatures have explored whether foreign presence has an impact on innovation and productivity in a host country. A commonly shared argument is that when MNEs conduct FDI, host country firms are exposed to greater technological opportunities, with positive impact (Zhang et al., 2010). These positive externalities are known as FDI spillovers. Recent empirical work has advanced knowledge about FDI spillovers by suggesting various antecedents and moderators, such as strategies of senders (foreign MNE subsidiaries), absorptive capacity of recipients (host country firms), and modes of interaction between MNEs and local industry stakeholders through formal or informal collaborative linkages (Crespo and Fontura, 2007; Smeets, 2008). Despite sophistication of conceptual modelling and fineness of methodology, empirical evidence has delivered mixed results about the impact of foreign presence on a host country (Havranek and Irsova, 2011; Irsova and Havranek, 2013). The lack of consensus in the empirical literature intimates that the impact of foreign presence is subject to a number of unobserved contingency factors (Eapen, 2012).

Introduction: The Rise of Multinationals from Emerging Economies—Achieving a New Balance

The spread of particularly American multinational enterprises (MNEs) in the first half of the last century marked an increasing domination of the world economy by these firms. In the second half of the twentieth-century the dominance of American firms was challenged by a wave of MNEs from Europe, Japan and Newly Industrialised Economies. At the turn of the century it is, however, a group of rather ‘unexpected’ firms, such as Embraer, Huawei and Tata, from emerging economies that have stamped their mark on the world stage. Since then more MNEs from emerging economies are joining their ranks. The rise of emerging economy MNEs (EMNEs) has coincided with a shift in many aspects of production from industrialised countries to emerging economies and the accelerating dispersion of international R&D activities. In some emerging economies, this process is accompanied by the rise of a type of state capitalism. These changes pose challenges and bring opportunities for all participants in international business, including EMNEs themselves, developed economy MNEs (DMNEs), governments and multilateral organisations such as the World Trade Organization (WTO).

International Joint Ventures and Dynamic Co-learning between MNEs and Local Firms

Forming an international joint venture (IJV) is a strategically important step that shapes a firm’s internationalisation process (Park and Ungson, 1997) and is a strategy intended to quickly achieve geographical diversification or organisational growth. Many IJVs have been created for partners to comply with local restrictions on foreign ownership in host economies. Although there are many other reasons, one agreed upon point regarding IJV creation is that IJV learning is essential for a firm’s sustainable growth in highly heterogeneous and competitive international markets (Bresman, Birkinshaw and Nobel, 1999; Hamel, 1991; Lane, Salk and Lyles, 2001).