Is Internationalization Beneficial to Innovation? Evidence from a Meta-analysis.

VerfasserDing, Sasa

1 Introduction

The nature of the relationships between internationalization and innovation (the internationalization-innovation nexus) is an important consideration for firms that undertake cross-border activities. Firms engaging in exporting and FDI may experience innovation effects even if this is not the primary motivation for internationalization. Understanding the direct effects of internationalization on innovation and the indirect consequences on innovation from internationalization is an important consideration for private and public policy. Trade and investment liberalization is considered to enhance innovation by firms and thereby boost productivity in home countries (Tse et al., 2017; Xie & Li, 2018). Robust evidence in this area is therefore important for managers engaged in developing international strategies and managerial systems and for national and international policymakers concerned with promoting innovation.

A variety of theoretical approaches are used to examine the particular aspects in the internationalization-innovation nexus including resource-based view (RBV), knowledge-based view (KBV), dynamic-capability view (DCV), organizational learning theory, network theory, and spillovers perspectives. Most of these approaches predict positive outcomes from internationalization (e.g., Piperopoulos et al., 2018; Sun & Lee, 2013; Wang & Ma, 2018; Xie & Li, 2018). Some literature, however, identifies negative outcomes from internationalization because of significant costs from increased uncertainty and complexity (Hitt et al., 1997; Kafouros et al., 2008). The multiple theoretical perspectives used to examine relationships within the nexus therefore provide uncertain postulations on the net effects of internationalization on innovation. Empirical studies based on an assortment of research approaches provide inconsistent findings (Appendix 1). A variety of firm-level contextual factors has been employed to examine a range of causal paths in the nexus. The type of contextual factors considered partly depends on the theoretical underpinnings that influence the kind of causal paths under examination. Firm size and technology intensity of industries are normally considered as important contextual factors. Other factors such as the level of development of host countries and types of internationalization and innovation are sometimes studied. The mixed results in the literature suggest that improvements in research design connected to adequately addressing contextual factors considered in the various theoretical approaches would improve understanding on the impact of internationalization on innovation.

Using meta-analytical techniques, this paper aims to answer two research questions. (1) What is the direction and strength of the impact of internationalization on firm innovation? (2) Which key research design issues influence the estimates of the effects of internationalization on firm innovation?

Meta-analysis offers an effective and systematic tool to analyze a large collection of findings from independent quantitative studies to synthesize evidence. Although this type of analysis "cannot test the competing views against one another", it is useful in examining "the direction and significance of the bivariate relationships" (Bergh et al., 2016, p. 478). This approach is widely used in various topics in International Business (e.g., Bausch & Krist, 2007; Beugelsdijk et al., 2018; Schwens et al., 2018; Tang & Gudergan, 2018; Zhao et al., 2017) and in innovation studies (e.g., Bowen et al., 2010; Camison-Zornoza et al., 2004; Grinstein, 2008). To the best of our knowledge, few meta studies explicitly examine the relationship between internationalization and firm innovation. An exception is Rosenbusch et al. (2019) that considers the impact of business environment factors on a specific aspect of the nexus, i.e. offshoring of R&D activities (or R&D internationalization). Our study assesses the more general effects by including manufacturing and sales as well as R&D internationalization and focuses on the effect of research design factors on estimates. This research paper therefore complements and extends the study by Rosenbusch et al. (2019).

Our study responds to calls to improve research design to enhance the validity and reliability of results (Dimos & Pugh, 2016; Starbuck, 2016). These calls are also growing in International Business research (e.g., Aguinis et al., 2017; Cuervo-Cazurra et al., 2016; Reeb et al., 2012; Steel et al., 2021). Good research design includes addressing important contextual factors and analytical techniques to improve the validity and robustness of results. This study examines these issues to assess the effects of key research design issues on the direction and effect sizes of relationships within the nexus.

The meta-analysis summarizes 99 studies published between 1998 and 2018. The results reveal that on average internationalization has a positive, though relatively small impact on innovation. Our results indicate that divergent results are related to research design factors, including the selection and measurements of key constructs, country-context, data characteristics (panel data vs. cross-sectional data and primary data vs. secondary data) and statistical artifacts (estimation methods, model specifications and endogeneity control). The study considers the effect of multidimensionality of internationalization and innovation concepts by examining the impact of different dimensions of internationalization and innovation. The study found that national differences in the magnitude, strength, and direction of the focal relationship are substantial with positive and statistically significant results found in 15 out of 21 countries and the effect sizes ranging between 0.059 (Ireland) to 0.650 (Australia). Single country studies offer important insights, but generalization should be treated with caution as it may lead to incorrect conclusions. Meta-regression results further reveal that heterogeneity of effect sizes is associated with data characteristics and estimation methods. In summary, the paper highlights the importance of internationalization to innovation and the focus on research design factors provides evidence that is potentially useful to develop theory to provide more robust postulations on the internationalization-innovation nexus.

The paper makes contributions to the International Business and Innovation literature by providing evidence on what existing studies reveal about the direction and size effects of a wide range of internationalization activities for innovation. The results also highlight how improved research design including better addressing contextual factors and data analytical techniques might improve the potency of estimates. Consideration of these key research design factors enables the proposal of "best practice" recommendations to improve the robustness of results. This study is timely as internationalization has been asserted to be good for firms (Contractor, 2007) but such assertion has not been universally supported by empirical evidence. Moreover, the growth of anti-globalization movements and trends towards more nationally focused policy calls the value of internationalization for innovation (Witt, 2019) into question. A more robust evidence-based view, on the extent of benefits and insights into developing research design to secure more robust results, is helpful in developing the international strategies of firms and also for national and international policy debates on the effects of globalization on innovation.

2 Literature Review

2.1 Major Theories of Internationalization and Innovation

Internationalization, defined as business expansion "across the borders of global regions and countries into different geographic locations, or markets" (Hitt et al., 1997, p. 767), may enhance innovation which concerns activities that "put [a new idea] to practice while paying special attention to its usefulness" (Camison-Zornoza et al., 2004, p. 334). Most research on the internationalization-innovation nexus relates to the acquisition and use of resources. The theories used to investigate the nexus use different mechanisms to examine a range of aspects on how internationalization impacts on innovation. The postulations from these theories often include a range of contextual factors thought to influence relationships within the nexus. There is however no consistency on which contextual factors are considered to be important in obtaining robust results and that specify the applicability of findings. This has implications for the usefulness of results for developing strategic and managerial policies and public policy as it is often not clear if findings are applicable to the conditions faced by policymakers. Due to space constraints, we provide only a brief overview of the major theoretical perspectives, that concludes a summary of how addressing key contextual factors may help to enhance the predictive power of the various theories.

Although the approaches taken by RBV, KBV and DCV use somewhat different mechanisms to explore the relationship between resources and the development of competitive advantages, at the core, they are based on acquiring, developing, and effectively using resources to secure competitive advantages. The major distinguishing factor between these approaches is the process by which innovation leads to competitive advantages. The RBV focuses on the identification and exploitation of all resources, whereas the KBV focuses on how firms develop knowledge from their resources and DCV on cultivating routines and practices to enhance competencies. Studies using these approaches have found that internationalization can facilitate the acquisition and development of innovation by securing the specific advantages of different countries enabling the capture of ideas, information and knowledge from a greater number of new and...

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