Date: April 4, 2014

Time: 10:00 am-11:00 am

Venue: Room 1102, Administration Building, Zijingang Campus

Speaker: EDEN YIN, Judge Business School, University of Cambridge

Host: Associate Prof. DU Jian, Department of Management Science and Engineering, ZJUSOM

Topic: Foreign Firms’ Internationalization of R&D in Emerging Markets: Role of Absorptive Capacity, Appropriability and Organizational Model

Abstract: Foreign firms are increasingly moving their research operations to emerging markets. This represents a new technology strategy that foreign firms are adopting to achieve low development costs, gain better consumer insights and access to novel local technologies. However, whether such a R&D strategy can be effective or the drivers for its effectiveness remains under investigated. Using absorptive capacity as a theoretical framework, we examine the effectiveness of this strategy, e.g., whether it leads to superior performance of foreign firms’ local subsidiaries and what are its boundary conditions. Using a large and unique data set containing 524 foreign firms (216 WOSs and 308 IJVs) that have R&D units in China, we show that foreign firms’ local absorptive capability plays a central role in driving the effectiveness of their internationalization of R&D in producing superior local performance. Moreover, the two dimensions of the appropriability condition, i.e., local knowledge base and local government support significantly moderate this relationship. This finding demonstrates the importance of building local knowledge and securing local government support to ensure the success of foreign firms’ R&D strategies in emerging markets. Our study contributes to the growing literature on foreign firms’ internationalization of R&D, emerging market innovations, and organizational entry modes.