Foreign ownership and novelty of product innovations in China
Perez, Ludovico Alcorta
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This paper examines a relationship between foreign ownership and innovation novelty in the context of host advanced developing economies. The analysis is focused on two dimensions of product innovation novelty, the novelty of introduced innovations and the economic benefits from introduced novelty. We find that foreign affiliates do not have higher odds than domestic firms to introduce product innovations of higher novelty. Indeed, the findings indicate that the higher odds of foreign firms of introducing innovations of higher novelty are moderated by exploitation of ownership advantages and by a host market orientation. However, we find that foreign affiliates have higher odds to capture higher economic benefits from product innovations of higher novelty than domestic firms. Hence, although foreign affiliates are not higher up on an innovation novelty ladder than domestic firms, they replenish their product and innovation portfolio with innovations of higher novelty at a faster rate than domestic firms.