Does Internationalization Improve The Innovative Capacities Of Latecomer Firms?

Is internationalization actually helpful for improving a latecomer firm’s innovative capacity?Not enough work has been done on this topic in existing literature.In terms of research perspective,existing literature didn’t form a consensus;In terms of dimensions,previous empirical studies used different measures;In terms of effect mechanism,scholars tended to discuss from national or industrial level,part of researches from enterprise level only answered the question that whether"internationalization" has effect on innovative capacity or not.These theoretical gaps provide research ideas for our study.On the macro level,China needs to develop more strategic foreign investment to achieve technological catch-up;On the micro level,latecomer firms need to break through the geographical boundaries for innovation resources in a competitive and open environment.These realities make our research more valuable.Therefore,this paper uses the balanced panel data from 2011 to 2015 on 410 Chinese Listed Companies as A-shares in the Shenzhen and Shanghai Stock Exchanges.Choosing the outside-in internationalization perspective,we analyze the influence of internationalization on latecomer firms’ innovative capacity using the depth and width of internationalization as dimensions;the moderating effect of absorptive capacities and intellectual property protection are also investigated.This empirical study makes the following conclusions.First,the depth of internationalization significantly has remarkable positive effects on innovative capacities.Deepening the degree of internationalization can help latecomer firms obtaining recessive knowledge,reducing R&D costs,and improving search efficiency.Second,the breadth of internationalization significantly has remarkable positive effects on innovative capacities.Overseas Subsidiaries which are widely distributed can help latecomer firms producing more localized innovation products,integrating R&D resources,tracking technology trends,and reducing R&D risk.Third,absorptive capacity has a negative moderating effect on the relationship between depth and innovative capacity,and has a positive moderating effect on the relationship between width and innovative capacity.For latecomer firms,when they deeply embedded in the host country innovation system,they will be limited by their absorptive capacity.However,when they invest overseas widely,absorptive capacity will help them identifying and utilizing innovation resources.Fourth,intellectual property protection of the region has a positive moderating effect on the influences of both depth and width.In open economy,intellectual property protection can stimulate latecomer firms’ continuous motivation to innovate,promote developed countries exporting high-tech products to developing countries,advance the transfer of production line from developed countries to developing countries,and avoid the trap of intellectual property in international business.