Relationship between international experience and innovation performance: The importance of organizational learning for EMNEs

Abstract

Research Summary This study examines the impact of international experience (IE) on innovation performance (IP) in the context of emerging economy multinational enterprises (EMNEs). EMNE internationalization is often driven by strategic asset‐seeking behavior to improve their knowledge base. But, does internationalization lead to more innovation for these EMNEs? Drawing on organizational learning theory, we find a positive relationship; however, the IE–IP curve is not linear, instead it follows an S–shaped curve. We also introduce the moderating role of the difference in the direct and indirect learning rate, as well as the knowledge distance between an EMNE’s home and host countries, to the IE–IP relationship. Data on 161 Indian biopharmaceutical firms, of which 64 are EMNEs, from 1997 to 2013 were used to empirically test our hypotheses. Managerial Summary Emerging economy multinational enterprises (EMNEs) are expanding to foreign countries to seek new knowledge and improve their ability to compete with more advanced developed country firms. In this article, we examine whether international expansion by EMNEs actually improves their innovation performance. We find that international experience does improve innovation because of organizational learning. Further, we look at whether firms are able to learn faster—both from their own innovation efforts as well as the innovation efforts of their partners. We also look at the difference in the level of knowledge at home versus at the location of the foreign subsidiaries and the impact of this distance on the international experience—innovation performance relationship. We examine EMNEs from the Indian biopharmaceutical industry. Our study provides managerial insights on the international expansion and innovation‐related activities of EMNEs.

Learning by outward and inward internationalization and the outward/inward innovativeness of firms in Poland

“…Researchers associated with this issue indicate that the strength of the relationship between internationalization and innovativeness of firms depends on the degree of internationalization achieved, i.e. the degree of firm's international involvement determined by various forms of internationalization such as exporting and foreign investments, spatial scope of firm activity, and its international experience [Kotabe et al, 2002;Kafouros et al, 2008;Shearmur et al, 2015;Thakur-Wernz and Samant, 2017]. So, in all these cases, one cannot discuss any more about learning by exporting, but about learning by internationalization.…”

Knowledge flows, strategic motives and innovation performance: Insights from Australian and New Zealand investment in Europe

“…All firms found R&D and innovation very important for the future performance (Ciabuschi, Holm, & Martín, 2014; Figueiredo, 2011; Thakur-Wernz & Samant, 2019). NZ3 noted: ‘It must be kept at the current level of 10–15% of the revenue.…”

Knowledge Sources and International Business Activity in a Changing Innovation Ecosystem: A Study of the Indian Pharmaceutical Industry

“…First, technology accessed solely from within an emerging-market firm, or from domestic sources, may be insufficient to support international success in a rapidly-changing technological environment (Chatterjee & Sahasranamam, 2018; Li, Chen, & Shapiro, 2010). Hence, firms seek external knowledge for developing new innovations (Awate et al, 2015; Thakur-Wernz & Samant, 2017). Second, because new inventions emerge from a recombinative process using different streams of knowledge (Fleming, 2001), external sources are especially valuable for helping emerging-market firms to develop internationally-exploitable innovations (Wang et al, 2013).…”

“…Many such firms have transformed themselves to be globally competitive, responding to institutional transitions and the resulting ecosystem changes in their home markets over recent decades (Cuervo-Cazurra & Genc, 2008; Ramamurti, 2012a). Because innovations are embedded in institutional contexts, the country-specific triggers and drivers of innovation processes are important (Chittoor, Aulakh, & Ray, 2015; Peng, Ahlstrom, Carraher, & Shi, 2017; Thakur-Wernz & Samant, 2017). The strength of the intellectual property (IP) regime is one such trigger, playing a key role in driving innovation in knowledge-intensive industries such as pharmaceuticals (Brandl, Darendeli, & Mudambi, 2019; Kale & Wield, 2008; Papageorgiadis & McDonald, 2019).…”