Project Description
Although foreign direct investment (FDI) allows emerging market firms (EMFs) to experience various institutions
and learn to innovate, we know little about the] effects of exposure to diverse institutions on EMFs’ environmental
innovation—a sustainable approach to pursuing economic growth. Incorporating the institutional logics
perspective with the learning-from-diversity view, we investigate how an EMF’s environmental innovation
benefits from diverse environmental regimes embedded in both its inward and outward FDI. We posit that EMFs
become environmentally innovative by learning from diverse environmental regimes embedded in FDI activities.
Also, this learning effect depends on the institutional logics dominant in these firms, demarcated by their
ownership structure. Whereas the market capitalism logic strengthens EMFs’ learning-from-diversity effect, the
state socialism logic does not. Analyses of a sample of 275 publicly listed Chinese firms between 2009 and 2018
support these theoretical arguments. Our findings contribute to the learning-from-diversity and institutional
logics literature.
Project Personnel and Beneficiaries
In this study we call managerial attention to rethinking what else
firms can gain from FDI. Although economic returns are necessary, firms
in emerging markets can develop environmental innovation via learning
from various environmental regimes embedded in IFDI and OFDI. This
learning outcome goes beyond profit-focused know-how and technologies, as explored in past studies. Instead, environmental
innovation incorporates economic returns with environmental benefits.
Moreover, our findings have important implications for policymakers
in both FDI source and destination countries. Besides economic
gains from FDI, environmental innovation that EMFs develop via FDI
can increase positive externalities and decrease the negative ones,
therefore contributing to social welfare more sustainably.
Outcomes to Date
Please refer to the attached document for details.
Project Significance
We make two primary contributions. First, we contribute to the
literature on learning from diversity by focusing on diverse institutions embedded in both IFDI and OFDI and identifying their distinct mechanisms for driving EMFs’ environmental innovation. Although the extant literature has advanced our understanding of diverse institutions across countries and their impacts on firms (Jackson and Deeg, 2008; Jackson and Deeg, 2019), many aspects of such diversity are pivotal to EMFs and their sustainable growth, albeit remaining inadequately studied.
Second, our study enriches our understanding of the critical role of a
firm’s institutional logic in affecting its innovation as a result of learning from FDI diversity. The importance of firm-level institutional logics has long been recognized for social relations and organizational behaviors (Friedland et al., 1991). The underlying rationale is that every social group (e.g., organizations) has its own values and beliefs (i.e., an institutional logic), thereby focusing on specific issues and following unique rules (Thornton and Ocasio, 2008). In this study we find that institutional logics guide firms to acquire specific knowledge components that are better aligned with the societal reality of these firms.