Unraveling the Other Side of the Coin: Outward FDI of Emerging-market Multinationals and Reverse Technology Spillovers

Abstract

Purpose Building on the literature on foreign direct investment (FDI) spillovers and 2R-based view, we aim to hypothesize and examine whether outward FDI contributes to the productivity of domestic firms in a large emerging market. In addition, we explore how firm-specific knowledge resources and subnational regions may matter considerably in shaping the contribution of outward FDI spillovers to the productivity of domestic firms. Design/Methodology/Approach We test our hypotheses empirically using a longitudinal dataset of Chinese manufacturing firms and the panel data approach. Findings We observe the positive contribution of outward FDI spillovers to the productivity of domestic firms in China. Moreover, we demonstrate that subnational regions play a crucial role in explaining the variations in the contribution of outward FDI spillovers to the productivity of domestic firms. Research Implications Our study conducts an initial examination on whether outward FDI matters for domestic firms and how knowledge resources within firms and subnational regions where firms are located shape the contribution of outward FDI spillovers to the productivity of firms in large emerging markets. Our findings offer important theoretical and practical implications.