Knowledge Seeking and Outward FDI of Emerging Market Firms: The Moderating Effect of Inward FDI

Abstract

This study examines whether a host country’s industry-specific technology advantage increases the propensity of emerging market multinational enterprises (EMNEs) to invest in the host country. The study further explores whether inward FDI in EMNEs’ home markets, by generating knowledge spillovers in the relevant industries, decreases EMNEs’ propensity to invest overseas for knowledge seeking. We test our arguments using a longitudinal dataset of the overseas investment activities of Chinese manufacturing firms. We find strong support for our hypotheses after controlling for other important outward FDI motives. We discuss the implications of our results for research and practice.

Keywords: emerging market MNEs, knowledge seeking, technology advantage, outward FDI, inward FDI, China