The Innovativeness of Foreign Firms in China

Branka Urem, Ludovico Alcorta & Tongliang An


This paper studies the relationship between foreign ownership and innovations of high novelty in context of advanced developing countries. We develop hypotheses about a direct relationship in terms of two dimensions, propensity and intensity of innovations of high novelty, and a contingency hypothesis about the moderating impact of R&D internationalisation on the relationship with propensity. The analysis is based on innovation survey data on manufacturing firms from Jiangsu province of China. Hypotheses are tested using non-parametric methods. We find that foreign firms do not have a higher propensity of innovations of high novelty, not even when they engage in formal R&D. However, the evidence suggests that foreign firms have a higher intensity of innovations of high novelty than domestic firms.

JEL codes: F23; L60; O31

Keywords: multinational enterprises, foreign firms; innovation; manufacturing; China

UNU-MERIT Working Papers ISSN 1871-9872